The potential impact of Covid-19 on the Irish housing sector

Abstract

Purpose This paper aims to examine the implications for the Irish housing market of the economic slowdown due to the Covid-19 virus. Design/methodology/approach In this paper, an inverted demand function for housing is augmented to include a residential market activity variable and estimate the impact on house prices of the decline in economic activity due to the virus-related measures. The likely future path of house prices based on two different recovery scenarios is also examined. Under both scenarios house prices are forecast to decline in the near term. Findings The scenario analysis presented here indicates that Irish house prices are set to fall over the next 18 months as a result of the Covid-19 downturn. This contraction in prices is due to the decline in household disposable income and the sharp fall-off in mortgage market activity, which will inevitably result from the administrative closedown implemented by the Irish authorities. Originality/value As such the approach builds on several studies which have examined both house price movements in general and the relationship between house prices and mortgage credit availability. The paper also draws on the latest analysis of the implications for the Irish economy of Covid-19 and the related administrative closure methods introduced by the public authorities.