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.