Our initial calculation of estimating potential oversupply of new housing April 06-09 used population growth between 96-06 to estimate the potential number of houses needed if population increased at the same rate in 06-09. We have refined this model to use household numbers that better reflect household fragmentation, to include a rate of obsolescence (at 6 per 1000 per annum) and for holiday home build (5 per 100), and to take account of the underlying surplus vacancy rate in 2006 (calculated by the DoEHLG/DKM as in excess of a base rate of 6%, minus 23K under-counted holiday homes – 87,356). It does not take account of local effects such as development plans or strategic investments, or the functioning of local labour markets, and provides an estimate of oversupply not the actual oversupply which is unknown.
At the global level, the model suggests that given household increase 1996-2006 there would be a need for 125,253 units to accommodate new households in the period Apr 06-Dec 2009 and 13,011 houses would be used for holiday homes (5% of stock). There were 87,356 vacant surplus stock above the 6% rate in Apr 2006 and 217,101 houses built between Apr 06-Dec 09, and during the same period we would expect 44,425 to become obsolete (a total potential stock of 260,032), suggesting that there is a presently a surplus stock of 121,777 vis-à-vis potential demand if households grew by the same rate in 06-09 as in 96-06 and holiday home investment stayed buoyant.
This tallies quite well with DoEHLG/DKM and Goodbody estimates that surplus stock is presently between 122-147K or 103-144K based on an estimate of the number of new houses without a mortgage and the 2006 surplus at either the 6% or 7.3% (EU) base rate. The estimations for each county based on the model are as follows.
What the model shows is that there are relatively high rates of potential oversupply around the country, when one considers household growth, obsolescence, holiday home build, and the 2006 base vacancy rate at 6%, with only Fingal (2.1% oversupply), South Dublin (9%), and Meath (7.9%) having relatively small surpluses, and Galway City (-0.1%) having a very slight potential undersupply.
From this analysis it appears that demand and supply have become somewhat uncoupled in a number of places, meaning it will take longer for surplus stock to be taken up. This might especially be the case in rural areas, as rural to urban migration may become an issue the longer a recession persists. In the three counties above and Galway City, stock should be taken up relatively quickly when demand returns.
Also see our other recent posts on this topic (here, here, here).
Ireland after NAMA 
January 24, 2010 at 2:51 pm
The National drift in Average household sizes was .2 persons per household per intercensal in the 1980s and 1990s , that is .2 persons every five years.
The 1996-2002 droft was .2 persons in 6 years and 2002 – 2006 was .13 persons in 4 years.
This abatement in the pace of shrinkage ( and the rise in the birth rate in the past decade) would still tend to indicate that the average household size is shrinking albeit not as quickly as in the period 1981-1996.
The last census was 3.5years ago, it would be wise to assume that each household is now .1 persons smaller than in 2006 and to adjust accordingly.
January 25, 2010 at 3:22 pm
Ended up here after a friend posted a link to this on facebook.
50,000 holiday homes for the entire country seems a bit low. I’m from Dingle, Co Kerry, and there are easily a few thousand holiday homes, or homes owned by locals but rented out to tourists during the season, there alone. These properties may be empty for a lot of the year but they constitute second homes or businesses, not unsold stock. I’d be interested to see how much of the Kerry excess above is made up of these.
That’s not to say that the general thrust of the argument – namely, that there are too many empty houses – isn’t true – I’m just nitpicking at that 300+% figure for Kerry. I think it may include quite a bit of tourism-related building.
January 25, 2010 at 6:25 pm
Extrapolated population projection figures for some counties and in particular, those of the Dublin and Mid-East regions do not provide a true indication of projected household demand for housing. Spatial planning policy for the Greater Dublin Area has actively sought to increase the housing output in the Dublin Region relative to the Mid-East in order to stem the dispersal of population from the Dublin Region to surrounding counties.
Target population figures for the Dublin Region would therefore be higher than would be expected based on extrapolated demand from the 1996 – 2006 period, reducing the level of reported oversupply.
January 27, 2010 at 10:36 am
There seems to be a serious methodological flaw in the above table, which estimates the demand for housing within each region as the ex post growth in households. This estimate ignores the logically a priori effect of local authority development control. A cursory examination of the above table indicates that some areas have experienced little growth in households over the period 96-09. For instance, DL-Rathdown has restrained cumulative population growth to 2%, Limerick City a mere 1% and Cork city has exiled 6% of its residents. This anomaly curiously treats undersupply as inflated oversupply, so that both DL-Rathdown and Limerick City appear to have built 10 times more houses than were needed and Cork City 5-fold. Surely, a more accurate estimate of oversupply should use proximate employment growth which gives a far better indicator of spatial housing demand. This would allow us to consider the arbitrary impact of restrictive planning.
January 27, 2010 at 11:01 am
[…] has been running ahead of realistic population projections, especially post-2005 (see our post here). To take the example of Leitrim. Between 1996-2006 the population grew by 3,893 from 25,057 to […]
January 27, 2010 at 11:25 am
You are all right that the what is being demonstrated above is a particular model that runs purely off of projected population based on population growth 1996-2006 to calculate projected over-supply as a way of illustrating the extent of the issue, and in a sense this is a best case scenario – that population continued to grow at the same pace when clearly it hasn’t. Some of the building that occured would have been for the holiday homes market, or been following development plans in-line with NSS and NDP objectives, or would have been for social housing provision, although the overall number of holiday homes and social housing would have been small in comparison to the overall build. The point is that supply was running ahead of demand all over the country, although there might be local effects in places such as DL-Rathdown that need to be teased out. As we know from our analysis of POWCAR data, the difficulty with employment data is where people live and work varies enormously and a very large number of people do not work in the county they reside in.
January 27, 2010 at 1:17 pm
Hi,
I agree that employment has its pitfalls too. But oversupply can not be determined spatially when the planning permission lottery has been so geared to artificially restricting the supply of desirable homes in desirable locations – where vibrant job markets exploded – and pushing developers to build in peripheral towns where job growth was primarily construction-related.
A sober discussion of oversupply must first of all note how much better Ireland did during the housing boom than Britain. In Ireland, houses were built whereas in UK the phantom housing boom added very little new housing stock. The Irish Question is why were so many housing starts spatially decoupled from economic activity.
January 27, 2010 at 1:35 pm
“The Irish Question is why were so many housing starts spatially decoupled from economic activity.”
I agree, that this is a question that needs to be answered. Clearly commuting explains some it (see below), but only to an extent, the question is what was driving build elsewhere. Here, we’re probably into politics, tax schemes, and locally driven, speculative, unchecked growth strategies.
Of the workforce who we know where they live and travel to work in Ireland (exludes mobile, blank, overseas and N. Ireland destinations) we know that on average 33% of this workforce are employed in a different county from where they reside. To go back to your earlier point, in DLR 54% of the workforce are employed outside the local authority area.
January 27, 2010 at 1:58 pm
Interestingly, you have sought to explain why there was oversupply rather than why was there undersupply in the most dynamic and diverse employment hotspots. The feasibility of locally driven, speculative development strategies in some local authorities is an ex post outcome of arbitrary planning regimes which skewed normalised spatial preferences of commuters – e.g. of households to live close to job opportunities – and displaced housebuilding to remote towns The imperative to preserve greenfield sites within and around desirable localities and restrict mass housebuilidng (of spacious dwellings) where needed has resulted in the erroneous insight that Ireland now suffers an oversupply of houses everywhere.
January 28, 2010 at 7:01 pm
[…] the basis of our initial sources plus the loan data, 50 percent then seems about right. Also see our post about supply versus population demand, which illustrates that based purely on a best case […]
March 6, 2010 at 9:33 am
[…] latest being from UCD today. The two others are a NIRSA study from January 2010 (which has several sources from irelandafterNAMA blog) and a report by DKM Consultants in September 2009. Although the three reports adopt slightly […]
March 8, 2010 at 1:58 pm
[…] An estimation of oversupply by County – 24th January, 2010 […]
March 8, 2010 at 7:51 pm
[…] undercounted holiday homes but did not estimate how many (there were 49,789 in Census 2006). In subsequent analysis to calculate potential overhang they used a projection of population household growth based on […]
March 10, 2010 at 12:51 pm
[…] NIRSA undertook work whereby they established the number of households by Census area in 1996 and ag…(an 11 year period) and then projected that growth for 2006 – 2009 (a 4 year period) by increasing the 2006 household figure by 4/11. In other words assumed that the previous 11 years of growth was a pointer to the following 4 years (another BIG ASSUMPTION). Their results are shown here. […]