We’ve been asked a few questions with regards to our estimates for vacant property (see post here).

1) What do we mean by vacant houses?

The 302,625 housing units we identified as vacant are properties that do not have anybody living in them as their principal residence for the majority of the year.  They are principally vacant, but not necessarily available for the market and include vacant houses available for sale, vacant houses available for rent, vacant houses that are not on the market, under-counted second and holiday homes, and abandoned properties

2) How did you determine that 50 percent of the 215,451 houses built between April 2006 and end of 2009 are vacant?

This rate was based initially on two sources – our analysis of vacancy on under-construction ghost estates and a number of site visits to ghost estates in Kildare and Dublin.  We have now found another source with corroborates this rate.  The DoEHLG figures on loan approvals show there were 127,930 loans approved by banks, building societies and local authorities for new houses built since January 2006 up to Q2 2009 (’06, 53,995; ’07, 40,497; ’08, 26,293; and ’09, 7,242).  The number of housing units built between Jan 2006 and Q2 2009 is 237,449.  What that means is that 53.9 percent of these new-build houses have a mortgage, a percentage of which will be vacant (as investment properties or holiday homes), and 46.1 percent are either empty or have no loan against them (and our view would be that a large proportion of these are vacant as many would be investment properties that would have been difficult to rent or flip).  On the basis of our initial sources plus the loan data, 50 percent then seems about right.

3) Of the 302,625 vacant houses we identified and how many are potentially available for occupancy as a principal residence?

According to Irish Property Watch.  114,178 housing units are presently for sale in Ireland and another 19,959 are for rent.  That gives an available stock of 134,137 units, some of which are presently occupied, some of which are empty secondhand homes, some of which are new, empty homes (CIF estimate 35K and DoEHLG up to 60K at Q2 2009).  Of the remaining units that are presently not available to the market these are made up of units that developers are holding back whilst waiting for the market to rise, individual investment properties that have been mothballed, under-counted holiday/second homes (we know that official figures are under-reported), and abandoned properties.  We do not know the proportions for these categories.  The DoEHLG estimate that 122-147K properties are stock in excess of an expected vacancy rate of 6% (an adjusted EU average – total vacant stock, 228-253K + 73K holiday homes), and Goodbody‘s estimate that vacant stock is 103-144K above an expected vacancy rate of 7.3% (EU average – total vacant stock, 229K-270K + 73K holiday homes), concluding that there is around 3 years of supply in the system (although this is geographically uneven).

4)  Are you surprised by the number of vacant properties?

No.  The vacancy rate in Ireland, as recorded by the Census, has been rising since 1996, despite the 16.8% growth in population between 1996 and 2006.  In 1996 the rate was 8.5%, in 2002 it was 9.8% and in 2006 it was 15% (these rates include holiday homes).  From April 2006 to the end of 2009 an additional 215,451 houses were built and released onto a rapidly softening market and deflating demand as immigration dropped.  In such circumstances, where many more houses are being built than demand, vacancy rates are going to increase (and because a property is off-the-market as an investment for buy-to-let or flipping or second/holiday homes does not mean it is occupied).  The vacancy rate is unlikely to have dropped during a period of excessive house building and 15% of the 1.98m units in the country is 297K.  Another way to think about it is this – there are 1.98m units in the state, the CSO report that there are 1.58m households in the state in 2008.  Assuming one household per house this is a difference of 400K.

5) How confident are we of our analysis?

We are confident that the analysis is robust given it is based on several different data sources that support each other – Census 2006, DoEHLG completion data, DoEHLG loan approval data, Irish Property Watch, and on-the-ground site visits.  Some of the difference between our own and DoEHLG‘s estimate of 228-253K (+73K holiday homes) and Goodbody’s estimate of 229K-270K (+73K holiday homes) is based on method, assumptions concerning whether any unit sold is occupied, and two quarters of data.  The top rate of their estimates + holiday homes are 326K (DoEHLG) and 343K (Goodbody) which is not far off our 352K (inc. holiday homes).  As noted above there will be a margin of error in our method depending on how many of the vacant units identified in Census 2006 became occupied and how many of the units built between 2006-2009 are vacant, but we think our estimates here are realistic.  We therefore believe that 302,625 units is about right +/- 10 percent.

Justin Gleeson and Rob Kitchin

Advertisements