Census 2011 revealed that there were 289,451 vacant properties (14.5% of total stock) in April 2011. Of these 59,395 (3%) were classed as holiday homes. That means that 230,056 properties are vacant. In any housing market there are always some houses vacant, termed base vacancy. In Ireland the Dept of Environment (DECLG) expect 6% of properties to be vacant at any one time. In other words, given the 1.99m units they’d expect 119,691 units to be vacant. That still leaves us with an oversupply of 110,365 units (plus 17,900 under-construction units as recorded by the DECLG unfinished housing development survey for 2011).
So what constitutes vacancy and oversupply?
The unfinished housing development survey for May 2011 revealed that there were 18,638 complete but vacant units on the 2,876 unfinished estates in the country. So, unfinished estates are a part of the vacancy issue but they are only 8.1% of vacant stock nationally (excluding holiday homes) and 15.6% of oversupply. As our new mapping module that overlays unfinished estates over vacancy at Small Area level reveals, the vast bulk of 2,791 Small Areas with vacancy rates over 25% do not contain an unfinished estate. This is as true for the cities and towns as it is for rural areas (and there are quite high vacancy rates in some urban locations as the map for Dublin City below reveals where there are 7,995 vacant houses and 16,321 vacant apartments (excluding holiday homes)).
So are the vacant units derelict or underconstruction properties? No. The CSO are quite clear about this and they put a lot of effort into training enumerators how to record housing. As they state:
In identifying vacant dwellings, enumerators were instructed to look for signs that the dwelling was not occupied e.g. no furniture, no cars outside, junk mail accumulating, overgrown garden etc., and to find out from neighbours whether it was vacant or not. It was not sufficient to classify a dwelling as vacant after one or two visits. Similar precautions were also taken before classifying holiday homes. Dwellings under construction and derelict properties are not included in the count of vacant dwellings. In order to be classified as under construction, the dwelling had to be unfit for habitation because the roof, doors, windows or walls had not yet been built or installed.
In other words, units had to be fit for habitation to be recorded in the Census. And vacant units were visited several times to make sure they were unoccupied.
As to why the 211,418 houses that are not on unfinished estates are vacant it is difficult to say with certainty. It seems likely that they are combination of:
1) empty unsold one-off housing units
2) bereavement properties (a widower has died and the unit is deliberately being kept off the market as the family wait for prices to rise, or it either hasn’t been rented or sold)
3) empty investment properties (either (i) unable to find tenants or (ii) unable to sell due to negative equity, (iii) left deliberately vacant (at least initially) – many properties were left vacant in the bubble because they were bought to flip and rapid asset appreciation outstripped rental income or they were waiting for major refurbishment or demolition to make way for larger developments despite being habitable
4) the owner is in long-term nursing care or retirement home (and the house is retained to move back to or is being kept off the market – temporary vacant for health care would have been recorded in the Census as temporarily absent)
5) vacant properties due to short-term or long-term migration (where the owner has not been able to let or sell or does not want to let/sell due to negative equity)
6) units presently for sale or available for rent (a look at daft.ie and myhome.ie suggest there are over 100,000 such units in the state although the majority are presently occupied).
The base vacancy is in effect no. 6; oversupply is principally nos. 1-5 plus unfinished estates (plus the 17.9k houses in estates underconstruction, plus one-offs underconstruction). Given falling property prices, we have had five years of some of these units being built up, which would have normally been released to the market but are either being held back or cannot be rented/sold. The 110,365 oversupply would have been mostly absorbed if we had not overbuilt new housing developments in the period 2005-08 (there are 85,538 occupied units on unfinished estates).
To what extent are these vacant properties available to the housing market?
All the property in the state is owned by somebody (brand new unsold units, whether on unfinished estates or one-offs are owned by builders, developers or banks) and they are all potentially part of the housing market. Even if a property is not for sale now, they could be if the market improves. When the market does start to recover – which it will do in time – held back properties will start to be released to the market (along with occupied homes who are in the same waiting game). In other words, just because they are not available now, does not mean that will never be available and we shouldn’t start to build new stock until market conditions are sufficient to first reduce oversupply and second to entice excess stock onto the market.
Even if they were available to the market, is there a demand for them?
The 230,036 vacant units are excess to present household numbers. Even occupying 110,365 of them (the oversupply) will be a challenge. Population growth is presently low (11.4K in 2010; 13.6K in 2011 according to the CSO) and this is predominantly made up of new births who won’t be buying anything for a long time. The falling average household size (from 2.81 to 2.73 between 06-11) will create some demand, as the smaller the average size whilst population grows the more units will be needed to accommodate households. In March 2011 the DECLG revealed that there were 98,318 households on the social housing waiting list. However, 65,643 of these were in suitable housing, but they could not afford the rent and were receiving rent supplement. Moving them from their present units to oversupply units will make no difference to the vacancy rate as they’re old accommodation will become vacant on leaving. The need for additional social housing stock is up to c.33,000 (though some would be best addressed through alterations to existing accommodation). To top it all off, getting access to credit is difficult at present and impossible for some kinds of property such as apartments outside of the principle cities.
Where does this leave us?
With a very weak housing market that will remain weak for some time, especially in areas with high vacancy as supply exceeds demand. We would expect demand to rise in and around the cities first as the economy recovers (though it must be noted that population growth in the centre of cities is weak, especially Cork and Limerick where population declined between 06-11; it is more robust in their suburbs). Demand in rural areas is likely to be much weaker and it may take many years for supply and demand to harmonize.
The census provides us with a valuable insight into the total numbers of vacant dwellings, however, it does not directly tell us why units are vacant. We can speculate and use other census data (e.g. relating to migration) to draw some conclusions, but what would be really useful if some research aimed at determining specific reasons for a few case study areas.
Regardless of the reasons, vacancy and oversupply remain a serious issue. It is one of the principle factors underpinning falling property prices. The only long term solution is to harmonize supply and demand, and this has to be the main aim across the country, including in the cities. If we don’t do this, then the market will take much, much longer to recover.