Increase in housing starts driven by apartment output

More than 3,500 residential units were commenced last month, up 30pc compared to May 2022, according to an analysis by Goodbody.

The total number of housing starts so far in 2023 has now risen to 13,500.

Goodbody economist Dermot O’Leary said that this is now the highest number of starts in the first five months of the year since records began in 2015.

In the year to May, a total of 28,400 units were commenced.

This remains below the post-pandemic peak of 35,000 commencements in one year.

"At the start of the year, we were concerned that rising yields and costs would lead to a fall off in apartment construction, but this has not yet occurred,” Mr O’Leary said.

Goodbody now estimates that there were more apartments commenced than scheme homes in the first five months of the year for the first time.

Apartment commencements rose by 23pc in the year to May, with almost 6,000 apartments now under construction. Over three-quarters of these units are located in Dublin.

This compares to just a 8pc rise in scheme housing commencements in the same period.

Mr O’Leary also pointed to the “necessary” role of the Government in keeping commencements at their current level as private residential sector faces viability challenges.

"While government borrowing costs have risen, the State has the resources to invest in new public housing due to booming tax revenues,” he said.

"This is resulting in the State, widely defined, taking an increasing share of output.”

Despite the increase in housing starts, shortages are likely to remain. Goodbody now expects that completions will linger around the 30,000 range in the coming year.