There have been a couple of follow-on stories in the Independent by Charlie Weston about the EBS decision to redline apartments outside of the cities (here and here). Weston suggests that the decision to redline apartments has been taken due to a feeling that there is excessive oversupply in areas outside of the principal cities and their hinterlands and they therefore represent a particularly risky investment. Unfortunately there is excessive supply of all kinds of housing just about everywhere, so its still not clear why apartments are singled out. The lack of any documented evidence-base to back up the claim is, I think, troubling.
I thought I’d have a look at apartments built in the Jan 2006 to April 2010 period (the stock most likely to be available to the market). For context, in April 2006, there were 139,872 apartments/flats in the state according to the Census (9.5% of stock). Almost 58% of these were within Dublin alone. According to the DEHLG/ESB house completion data, from Jan 2006 to April 2010 57,032 apartments were built constituting 22.6% of stock built (there is 4 month overlap in these figures at the beginning of 2006), meaning there’s c. 185,000 apartments in the state. Crudely portioning counties and boroughs into categories of ‘principal cities’ (Dublin, Cork, Limerick and Galway) and ‘rural/non-principal cities’ (see Figure), it is clear that c.80 percent of all apartments (c. 45,309 units) were built in the principal cities and their hinterlands, and c.20 percent were built elsewhere (c. 11,723 units). More importantly, of the 120,043 units of all types built in rural/non-principal cities only 9.7% of the 06-10 stock were apartments, whereas in the principal cities, apartments represented 34.4% of overall new stock. What this tends to suggest is that, although apartments are likely to be in oversupply everywhere, the oversupply is perhaps more pronounced in the principal cities and their hinterlands as it seems unlikely that 1 in 3 of new purchasers will want to buy a new apartment. In other words, perhaps there is a case for the redlining to be abandoned, turned completely on its head, or at least the redlining policy to be further explained. There certainly seems to be a case for a more geographical nuanced analysis than simply dividing the country into the four principal cities and everywhere else.
Weston also reports that EBS are being encouraged to tighten their lending criteria even further for first-time buyers, a group that would have typically bought apartments, under direction from the financial regulator. It was felt that the society was lending too much, especially to those on lower incomes.