The CIF have just published a report ‘Future Housing Supply in Ireland‘. Their main argument is that there is between 6 months and 4 years housing supply across the country and yet housing building has all but stopped except for a limited number of one-offs (80% of units built in 2010). In particular, Limerick City, Wicklow, Kildare, Limerick County, Cork City, Waterford City, Greater Cork, Kerry, Galway City, South Dublin all have less than 6 months supply. Meath, Clare, North Tipp, Fingal, Cork County, Mayo, Dublin City, DLR, Galway County, Westmeath, South Tipp all have less than 12 months supply. In other words there is an urgent need to start building houses again in a number of places around the country as there is a very real danger of running out of supply in these areas (see Figure 1). The report is an interesting lesson in how to combine and spin data for a particular vested interest purpose.
Principally what CIF have done is taken the DEHLG unfinished estates survey data and matched it to the target population projections in the Regional Planning Guidelines. There are three main issues with this.
First, it tries to reduce housing supply to the overhang of unsold new housing, ignoring the bigger issue of oversupply (all units inexcess of a base vacancy rate). The DEHLG itself calculates that oversupply (122-147K) is significantly higher than overhang (43K) – see our key housing stats post. As we have argued at length elsewhere to try to ignore the issue of oversupply and only focus on brand new houses is a massive folly as it only considers one part of housing stock.
Second, it assumes that the population growth targets issued to Regional Authorities in 2009 are realistic. These projections were based on 2002 and 2006 census data when there was significant population growth. The demographic shifts occuring in Ireland in 2011 are very different to that period. We are back into a period of emigration and the projections are almost certainly over-estimates.
Third, the wider economy is in the middle of a severe recession. It is very difficult to source mortgage credit, unemployment and underemployment is high, and the next generation of first time buyers are emigrating. There is little to no credit for investors. The housing market is simply flat.
In other words, the data entering the model is on the one hand selective and on the other suspect, and the study ignores the general context of the wider economy. CIF have been telling us for 12 months plus now that we only have 6-12 months supply in some areas of the country. It seems barely credible to argue that many places will run out of housing in 6 months time. This is simply is not going to happen given the levels of oversupply, emigration, stagnation in the housing market, and the state of the wider economy.
Census 2011 should give us a good idea as to where we are with housing and population/household demography. Once the data is released our housing supply/demand models can be recalibrated and we’ll have a better idea as to what kind of building programme we’ll need. Regional Planning Guidelines and Local Area Plans should then also be recalibrated. I seriously doubt we need to panic about supply until we have that data. If the CIF want a case for stimulus, it might have much more credibility arguing for investment in infrastructure than housing. The solution to an oversupply problem is not to produce more supply, it is to work it off.