The Threshold Between New Construction and Austerity

I was a bit baffled by the news that housing charity Threshold had, in its pre-budget submission, added its voice to those campaigning for government stimulus for new housing construction.  As quoted in the Irish Times, Bob Jordan Threshold chief executive suggested that “Up to 30,000 new houses need to be constructed annually to meet the ongoing demand for new homes. However, since the recession, housing construction has virtually ceased, with only 8,500 new units built last year.”  The organisation argued that, if left unchecked, the “housing shortage” could become a “full-blown crisis”.

A closer look at their submission reveals that the proposal for the Minister for Finance to consider a stimulus for housing construction is part of a wider and much more targeted set of proposals, which in large part aim to address the current threats faced by tenants in the increasingly precarious private rental sector.  Included in these are proposals to provide a financial package for the purchase and construction of social housing and amendments to Residential Tenancies Act.  Threshold are keen to point out that the problems of undersupply are restricted to particular, primarily urban, areas.  In this context, it is odd if a little unsurprising that the point picked up by the media is the call for new construction.

Another story is today’s papers offers a more apt corollary to the issues that Threshold raise.  A report from Oxfam claims that austerity policies across Europe are benefiting the top tier of society while impoverishing many households on the lower end of the economic spectrum.  Likening current austerity policies to structural adjustment programmes imposed on poor countries by the IMF since the 1970s, the report (in which Ireland features prominently) warns that:

“The only people benefiting from austerity are the richest 10% who have seen their share of income rise whilst poorest have seen their share fall. The UK, Greece, Ireland, Italy, Portugal, Spain – countries that are most aggressively pursuing austerity measures – will soon rank amongst the most unequal in the world if their leaders don’t change course.”

It is this growth in levels of inequality and the knock on effects this has, rather than simply a lack of construction, which produce the suite of challenges for tenants that are now being flagged by Threshold.

Cian O’Callaghan

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Still living in a haunted landscape

Yesterday the Irish Times published a short piece of commentary written by me to accompany a map of housing vacancy and unfinished estates, as part of the AIRO Pictures of Ireland series.  I’d originally submitted a slightly longer piece, which got cut by fifty percent due to space considerations.  Here is the full text to accompany the map.

As early as 2006, David McWilliams had coined the term ‘ghost estates’ for the dozens of unfinished developments visible on any trip across Ireland.  As the crisis deepened, unfinished estates became a symbolic and tangible marker of the excesses and follies of the property bubble.  In every village and town in the country were half-built houses and apartments, where the developer had ceased work or where units were unoccupied.

In short, too many housing units had been built for demand, the problem compounded by development finance evaporating.

The families who had bought and moved into what became unfinished estates were left trapped on them, facing a number of related problems.  These included living on or next to building sites and their associated health and safety issues, a lack of services and infrastructure, negative equity, anti-social behaviour, and a diminished sense of place and community.

Move forward to 2013 and very little has changed.  Unfinished estates still litter the Irish landscape, the people living on them face many of the same problems they did in 2006, and there is still a large oversupply of residential property in many areas of the country.

To date, the Department of Environment, Community and Local Government (DECLG) has undertaken three National Housing Surveys to monitor unfinished developments.  In the first survey, conducted in 2010, the number of unfinished estates were reported as 2,846, rising to 2,876 in 2011.  They were present in large numbers in every county in the country, but were particularly prevalent in the Upper Shannon area of Cavan, Longford, Leitrim, Roscommon and Sligo, the result of the tax-incentivised development.

In 2012, the DECLG reported that the number of unfinished estates had fallen to 1,770.  Unfortunately, the fall in numbers is principally because the definition of what constitutes an unfinished estate was changed.  The definition used in 2010 and 2011 refers to estates that have issues of vacancy and oversupply as well as outstanding development work.  In 2012 the definition refers only to the latter.

The map shows the distribution of the 1,770 estates with outstanding development work (black dots; see below).  The shading is the level of residential vacancy as reported in the 2011 Census, where dark red is over 25 percent vacancy.

In total, the Census revealed that there were 289,451 vacant properties (14.5% of total stock) in April 2011.  Of these 59,395 were classed as holiday homes.  In any ordinary housing market, approximately six percent of properties would be expected to be vacant (120,000 in the Irish case), meaning that oversupply is about 110,000.  There are also 17,032 units still under-construction according to the DECLG 2012 survey, excluding one-off sites.

To try and tackle the issues facing unfinished estates, the government set up two schemes.  The first, the social housing leasing initiative has sought to make some properties available for social housing.  The second, site resolution plans, are designed to tackle health and safety issues arising from incomplete or poor construction, with a fund of €5m administered by DECLG.  The former has had little take up and the latter has had little effect beyond fencing off dangerous areas and filling in potholes.

Most worryingly, the DECLG acknowledges that 1,100 of the estates are in a ‘seriously problematic condition’, yet only 250 estates (8.5% of 1,770) are active; that is, the developer is on site and undertaking construction.  That means that 1,520 of the estates that require development work have been abandoned to their fate.

Given that their developers have gone bust they are not likely to move towards completion in the short to mid-term.  In other words, several years after the crisis started, families are still living on developments that are substandard, with huge negative equity that locks them in.

In November, the Housing and Planning Minister, Jan O’Sullivan, announced that decisions would be taken in early 2013 to establish which estates are commercially unviable and need to have parts of them demolished.  Regardless of whether this happens or not, the unfinished estates issue does not seem set to be resolved for a number of years to come.

Unfinished estates and residential vacancy in Ireland

Rob Kitchin

 

Commercial vacancy in Ireland: the need for the full picture

The Irish Times are reporting a story concerning the level of vacant commercial buildings across the country for end of June 2012 based on figures published today by Geodirectory (the address database company owned by An Post and Ordnance Survey).  The figures give the first insight into the distribution of vacant commercial units across the country outside of Dublin (a couple of the large property companies provide information on Dublin vacancy).  As such, the figures are to be welcomed, although care is needed in interpreting them.

Geodirectory report that the number of vacant commercial buildings is 11 percent: 23,834 commercial units were recorded as vacant at the end of June out of a total stock of 226,622.  The highest number of vacant units was recorded in Dublin where 5,851 of 48,760 premises are empty (some 12 percent).  Carlow, Donegal, Dublin, Galway, Leitrim, Mayo, Roscommon and Sligo have vacancy rates above 11 per cent, with Leitrim and Sligo both having 14 percent.

Two things to note.  11 percent is still a high rate.  It should be 5-6%.  We can try and put a positive spin on this and say 9 out of every 10 commercial units is occupied, but 11 percent is nevertheless an oversupply.

Second, a very large proportion of the vacant commercial space was built in the last years of the boom and it consists of large-scale retail and office units.  There is a substantial difference between the number of units vacant and the size of space that is vacant.  For example, although 11 percent of units in Dublin are vacant, over 20% of office space is vacant (some 700,000+ sqm) (see our posts here and here for more info).  In some parts of Dublin the vacancy by space is well over 40%.  One way to look at this – imagine that there are ten units on a high street.  Nine of them are 1000 sqm in size and one is 5000 sqm.  If the larger unit is vacant then the vacancy rate per unit is 10 percent, the vacancy rate by unit size is 35 percent.  In other words, one cannot simply look at the absolute number of vacant units, rather we also need to consider the type and size of the units that are vacant.

Either way, whilst some analysts will interpret this data positively, and there will be some who will use it as an argument to start building commercial property again, I would be a lot more circumspect.  The data highlights that we have an oversupply of commercial units and whilst it is useful to know the number of units vacant, we need to contextualize this information in relation to size of those units and how much vacant space there actually is.  It would also be useful to get a break down by type of commercial property (office, retail, industrial, etc) by area and its status/quality (e.g. new, vacated, in need of refurb, derelict, etc) to provide a fuller picture.

Rob Kitchin

 

If this is the standard of banking analysis no wonder we’re in such trouble

The Sunday Independent today gives a summary of a recent Deutsche Bank report on the level of housing oversupply in Ireland and how long it will potentially take to work off, suggesting that we need to bulldoze 200,000 houses.  Last week the Sindo reported on a CIF statement that we are about to enter a housing shortage, this week Deutsche Bank think we have 43 years worth of oversupply.  What a difference a week makes!

Interestingly, Deutsche Bank’s report uses present data relating to housing vacancy (from the Census) and population growth (from CSO).  It is data that is frequently detailed on IAN (which we used to refute the CIF pronouncement last Sunday).  Unfortunately, how DB interprets the data is totally misleading for a number of reasons as I’ll set out below.  First it’s worth seeing what they said, taken from the Sindo (I’ve tried finding the original report online but with no joy).

“Deutsche Bank figures suggest that there are 289,451 empty houses in Ireland, including almost 60,000 vacant holiday homes. This represents a vacancy rate of 15 per cent.  … Demand for housing is the key factor as to how long it will take for this oversupply to be reduced, and aside from demand for second homes the key driver should be population growth”  Based on 2011 figures which showed population growth of just 13,000, and the average number of residents per house, the bank estimates that it could take until 2055 for the glut of houses to be worked through. 

The report says that if current population trends are sustained, housing oversupply will take 43 years to clear (this excludes holiday homes from unoccupied houses in the calculations). If holiday dwellings are included in calculations, the oversupply will take 57 years to clear.

However, the 2011 population growth figures were well below the levels seen over the previous decade. But such is the scale of vacant property that even at pre-crisis, boom-year population growth levels it would take almost 10 years to clear the backlog. And this is before taking into account developments which may subsequently be completed, and houses which are still being built — 10,480 in total in 2011.

“Barring a sudden and sizeable recovery in Irish net migration, or a politically controversial policy of demolishing large volumes of excess housing stock, housing oversupply will remain a feature for many years, possibly decades, to come,” says Deutsche.

“This has ramifications for any bank with development loan exposure, and also for the mortgage market, where prices have continued to fall and oversupply makes any reverse of this trend unlikely in the near term.

“Over 200,000 houses would need to be demolished in order for the housing supply to fall to three years of current population growth.”

The first major problem with the analysis is that it conflates housing vacancy with oversupply.  We would always expect there to be some vacancy in any housing market, usually 4-6% of stock.  It is pointless counting holiday homes as vacant stock, they are owned and used and are not oversupply.  Oversupply is the difference between base vacancy and overall vacancy (minus holiday homes).  In Ireland, oversupply off a 6% base vacancy rate is c.110,000 units.  Still a lot, but less than half the total 230,000 vacant units.  Working out how long any stock is liable to last has to be based on the oversupply not vacancy.

Second, it takes no account of obsolescence.  In any one year would expect some housing to drop out of the housing stock because it has become uninhabitable or needs to be replaced.  The housing literature would suggest 3-5 in 1000 houses becomes obsolete a year.  An example in Ireland is the present obsolescence of some social housing that is being replaced through regeneration projects.  We would expect the obsolescence rate in Ireland to be on the low side due to the newness of much of the stock, but it is still an issue that needs to be factored into any oversupply calculation.

Third, present population change data is useful for predicting what might happen in the next one to five years.  For longer term predictions a more thorough analysis needs to be undertaken that looks at the population profile and considers patterns of migration.  As we posted on Thursday, in the short term there will be a reduced demand for housing due to a small cohort of 15-25 working its way up the population pyramid.  In the medium term (10-20 years), however, demand will steadily rise due to a large cohort of 0-10 year olds.  To put in perspective, in 1994 there were 48,255 births, in 2010 it was 76,762.  In other words, it is not enough to just look at population growth when considering housing demand, but also the cohort of household formation age.  Both the CIF and DB fall into this trap when estimating short and long term demand.  One also needs to consider average household size, which has been consistently falling in Ireland over recent decades.  Even if the population remains the same, if household size falls then more housing units are needed to accommodate people.  It is likely that household size in Ireland will continue to fall creating latent housing demand.

Taking the first three points together it is simply not the case that we have 43 years worth of supply, nor do we need to demolish 200,000 houses.

The fourth main problem with the analysis is it takes no account of the geography of housing and population.  It is pointless at this stage to talk about Ireland as a single unit of analysis with respect to oversupply.  As argued on this blog in the past week (here and here), the market in Ireland has become highly differentiated with respect to location, type of property, type of buyer and price.  In some parts of the country, principally inner Dublin, the level of oversupply for houses (though not apartments) is low, in other parts of the country oversupply is large. The profile of the population also varies across the country, as does the pattern of migration.  At present, migration is mainly from rural areas to urban areas, and from inner city to outer suburb.  As such, the level of oversupply and how long it will take to work off differs enormously across the country.  It is certainly the case that the four principal cities and their hinterlands will work their oversupply off first and will be first to start building new houses and this will be within the next decade.  It will take longer in rural areas.

Neither the CIF or DB reports are particularly helpful as neither is realistic, based on a limited set of data and flawed assumptions.  Given the political influence of both, I find it extremely worrying that the standard of their analysis is so weak.  Indeed, given how poor it is, if this is the usual standard, it’s no wonder Ireland and Europe are in the trouble they’re in.  What is needed at this stage is some proper demographic and housing modelling for the country under different scenarios that will give us some reasonable projections as to take-up of stock and future demand.

Rob Kitchin

 

According to the CIF we need to add supply to our oversupply (do we really need more houses?)

The CIF are at it again.  Apparently we need to start building houses again, as reported in the Sunday Indo.  As usual, they use a selective choice of data to make their case, principally focusing on the supply side of things and ignoring the already existing oversupply and weak demand.  Here is the glaring hole in their analysis.

The Census 2011 reports that there are 230,056 vacant units in the country (excluding holiday homes), of which 110K constitute oversupply on a base 6% vacancy rate.  36,000 of those are either brand new vacant or underconstruction units in unfinished estates.  There are dozens of these estates in the Greater Dublin region and a lot of stock for sale/rent.  Only South Dublin has a vacancy rate below 6 percent.  According to the CSO, population growth in 2010 was 11,400, in 2011 it was 13,600.  This was population not households.  There was net out-migration of 34K in 2010 and 2011, principally of people aged 20-40 (household formation age), the big growth in population between 2006-2011 was children under the age of 5 (they aren’t buying anything soon).  Where is the figure of 25K demand coming from?

There is a reason why only 8,000 units will be built this year – we don’t need any more.  Between 1991 and 2011 there was 933K housing units built in Ireland, households went up by 625K, in other words we built 1.5 units for every one household.  We need to work off this oversupply before we start building again. If supply and demand were in-line we would not have had a drop of 50% (so far) in house prices.  We do need construction – green energy, ICT infrastructure, public utilities, public transport – stuff that will serves domestic and FDI companies and the general public, but not housing (we also don’t need offices or retail space – over 20% of office space in Dublin is vacant).  Even if the units are built where is the mortgage credit coming from for buyers?

The CIF is a lobby group for house builders.  No great surprise they want to build – they need the money to pay back NAMA/foreign banks on the other houses they built in-excess of demand.  If they got their way and built more units then all they’d succeed in doing is continue to flatline the market by adding supply to oversupply.  Of course nothing is stopping them from building other than finance and if they really believed their own mantra then there are thousands of sites with planning permission already granted and they can get on with it.  The reality is that 1,822 unfinished estates have outstanding building work around the country where the developer is inactive due to lack of finance.  Why would developers get finance for new developments when they can’t even finish off existing jobs (and who in their right mind is going to lend for construction given the data above)?  Their plea suggests they want the government to do something – like commission house building or provide tax incentives.  Hopefully their call will fall on deaf ears.  We’re already paying the price for a spectacular property crash.  We don’t need that situation made any worse.

Rob Kitchin

 

Do we really need to construct new commercial properties?

In his opinion piece on Tues, 3rd April in the Irish Times, Kieran McGowan of Property Industry Ireland makes the case that to attract FDI there needs to be investment in the commerical property sector: “Without the accommodation, we won’t get the FDI.”  His argument is that: “There is a view that there is an overhang of completed buildings across all parts of the property sector.  This is wrong, particularly in relation to buildings for firms entering the market in key urban centres throughout Ireland.”  He does not provide one piece of data to support this view, only assertion.  The reason for this is that the data available tells a different story.

Savills ‘Dublin Office Market in Minutes’, Q3 2011, report notes that 23% of Dublin office space is vacant.  In the prime locations of Dublin 2 and Dublin 4 the vacancy rate is 16.1% and 23.5%.  Moreover 18% of vacant offices are defined as Grade A.  To put this in context, the amount of empty office space in the city is equivalent to over 200 Liberty Halls (also see the Andrew MacLaran’s post on IAN on the Dublin office market).

The Society of Charted Surveyors Ireland recently reported that the office market had little to no activity with rents/yields falling.  The same was true of the industrial and retail sectors, both with large volumes of excess stock.  In fact, they report that the only part of the property market that is functioning near to normal is agricultural land. 

This is the industry’s own data and is reflective of patterns nationwide.

Whilst I agree that the strategic use of construction will help Ireland recover from the present crisis – particularly in relation to public infrastructure that will serve the general population and industry – we need to be careful not to misrepresent the true nature of the dire position of the Irish property market and the levels of oversupply within it across all sectors.  There is plenty of office stock to deal with most of the needs of FDI, with some minor strategic investment in upgrades or new build (we only need to build new stock for specialist facilities or where the investment is so large that there is no suitable existing empty office space – in both cases this will be for a handful of companies).

As with the housing market, there is a need to harmonize the supply and demand of commercial property in order to reduce oversupply and put a floor in the market.  Unnecessarily building new stock will work to keep the market either falling or flat.

Moreover, rather than overly relying on FDI to get us out of our present slump we urgently need to grow Ireland’s indigenous sector – the sector we should have been investing in when we were ploughing billions of euro into property speculation. They are our ideal tenants of the future.

Rob Kitchin

 

If the bulk of housing vacancy is not holiday homes or unfinished estates, what is it?

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).

 

Housing vacancy at the new Small Area level

For the first time, the housing stock and vacancy data from the Census has been released at the new Small Area (SA) level.  This new statistical geography, developed by the National Centre for Geocomputation at NUI Maynooth for Ordnance Survey Ireland, consists of 18,488 areas, typically consisting of 80-130 households.

 

Census 2011: Housing stock and vacancy

On Census night April 2011 there were 1,994,845 housing units in the state (up 12.72% from 2006, when there were 1,769,613).  1,649,408 of these units were occupied by the usual resident.  Of the remainder, 289,451 were vacant, 45,283 were absent on the night of the census but usually occupied, and 10,703 were occupied by guests.  Of the vacant stock, 59,395 were classed as holiday homes.

 

Six reasons why the property market is going to be very slow to recover

The general consensus amongst economists and property specialists is that the housing market is yet to reach its price floor.  Prices have fallen by 40-50% across the country and are expected to fall by c.60% by the time they are fully unwound.  There has been some speculation that the market might recover quite quickly, especially in the cities, with population growth cited as the prime factor to drive such a turnaround.  The hope is that Ireland might mirror the reasonably rapid recovery of the mid-1990s Finnish property crash, rather than the stagnation of the Japanese crash from the late 1980s wherein present property prices are still below those twenty years ago.  My own view is that the Irish crash will be nearer to Japan’s experience than Finland, with property prices unlikely to rise to peak 2007 prices for at least another ten to fifteen years, and longer for some parts of the country.  There are six reasons why.

1.  Still unwinding

As noted, Ireland is experiencing a steady but relatively slow unwinding of the property market, with property prices still falling.  They seem set to keep falling for at least another 12-24 months and possibly longer.  Until the market has fully unwound there will be no correction or growth.  And once it’s unwound there are a number of factors, set out below, that are likely to see the market flatline or only grow marginally for a number of years to come.

2. Oversupply

The property sector have tried to spin the data around oversupply every which way they can to make the issue appear better than it is.  Principally they’ve tried to focus on unfinished estates, arguing that oversupply is brand new, complete but vacant property.  They ignore the stock still being built on these estates and the vacant, brand new and under-construction one-off properties around the country.  They also largely ignore the vacant stock in the rest of the housing stock, principally on the argument that any property that is owned does not represent a problem, despite the fact that it can still be a part of the housing market and affect that market.  The Census 2011 preliminary results reported that there are 294,202 properties around the country that are vacant and habitable (14.7%).  Some of these properties, c.80-100,000 are holiday/second homes.  In any housing market one would expect some vacant stock, usually 3-4% (the Irish government uses a base vacancy rate of 6%).  Even in Dublin, vacancy is running at 7.8%, with a large oversupply of apartments in particular.  What that means is that there are c.200,000 vacant properties in the country excluding holiday/second homes, c.100,000 of which are in excess of expected base vacancy.  That is a substantial oversupply.  When supply exceeds demand prices fall or remain weak.  Until supply and demand are aligned, it is unlikely that prices will rise to any great degree.  For the last two years the property sector has told us that supply is running out in some areas and we need to start building again.  The data – either in terms of oversupply or units available to the market – does not yet support this assertion.  The property sector can try and spin oversupply estimates however they want but the evidence of vacant oversupply all round the country is plainly evident to purchasers.

3.  Weak demand

Demand for housing in Ireland over the past twenty years has been driven by two principle factors – population growth (net natural increase, net migration increase) and household fragmentation.  Basically, population grew rapidly (by a million people between 1991-2011) and the average household size fell.  The effect of the latter process can be quite profound, for example if the population remained the same size but the average household size fell then the population would need to occupy much more stock.  Whilst we do expect the population to grow over the next twenty years, it is tempered by two factors – emigration (there is presently net migration of -34,000 per annum) and age profile (the bulk of natural increase is accounted for by children under the age of five).  Emigration is primarily being undertaken by young adults (aged 20-40) who are at household formation stage; children under the age of five will not be at household formation stage for another twenty years.  Household fragmentation is affected by economic circumstance with children more likely to stay at home, parents less likely to separate, and young adults to share property to keep down costs.  These are often choices, not a compulsion, and until the wider economy recovers household fragmentation is likely to weaken.  One factor used to try and off-set these arguments is to focus on the social housing waiting list as evidence of pent-up demand.  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.    The need for additional social housing stock then is c. 33,000 (still a relatively substantial need), though it’s fair to say that that much social housing stock is in need of replacement, though the State cannot afford such programmes at the moment.

4. Negative equity and mortgage arrears

Properly functioning housing markets require a mobile population.  It is estimated that at least one in three household mortgages in the state are in negative equity.  Regardless of whether they want to trade-up or down, or to move to another part of the country they are locked into their present property unless they are prepared to realise a loss.  The Central Bank estimate that over 50% of investor, buy-to-let properties are in negative equity.  When prices do start to rise at least one in three housing units with mortgages are largely precluded from moving until prices rise sufficiently that they can trade.  Moreover, 62,970 households (8.1% of mortgages) are more than 90 days in arrears on their mortgage payments and a further 36,376 have restructured their mortgages (and so far are not in arrears).  This is a substantial growth on the 26,271 households in arrears in Q3 2009 and looks set to keep rising as households struggle to meet debt commitments, and might well be joined by many investors on interest only mortgages if they are asked to start paying down the capital.  Further, 25% of properties have more than one loan secured against it.  What this all means is that a sizable chunk of potential movers/sellers are impaired and will be absent from the market for some time.

5.  Downward spiral of the economy and accessing credit

The Irish economy has been severely weakened over the past four years and household income and access to credit is much reduced.  Austerity measures are biting through various tax increases and deductions.  Many are living with a radical change in financial circumstance through unemployment (14.4%) or underemployment.  An unstable Europe and general weak global economy is having a deadening effect.  The banks are reluctant to lend for mortgage credit.  What this all means is that even if a household wanted to purchase a property, their own reserves are depleted and their access to credit restricted.  This is unlikely to change until the wider economy recovers and the banks have worked through their corrections.  This is going to take a number of years, probably the best part of a decade or more.

6.  Confidence and caution

Confidence in the property market and the property sector in general is at an all time low.  Few at this stage believe what property professionals have to say regarding the property crash, housing need and construction.  They are seen as self-interested groups who are more concerned in their own bottom-line than the state of the nation.  People view the work of NAMA with deep scepticism and lack trust in the government and local authorities to address issues such as unfinished estates and taking in charge.  Issues around poor construction typified by Priory Hall and disputes concerning pyrite in concrete have weakened confidence further.   Investment purchases by individual households, a key feature of the boom (27% of mortgages in 2007), is likely to be much less prominent giving how badly burnt many investors have been by the crash. Combined with the issues above, it seems likely that confidence will remain weak and that buyers in future will proceed with caution.  Growth when it does occur then will be marginal and hesitant, perhaps after a short dead cat bounce.   Assuming the market falls 60%, at growth rates of 5% a year, which would be a good target to aim for, it will take 19 years to reach 2007 prices.  Even in the cities, where growth is likely to be the strongest, it’s going to take some time for confidence to return.

I would like to provide a more upbeat, positive assessment, but the evidence just doesn’t support that sentiment at this time.  Ireland’s property crash, aligned with the weak domestic and international economy, is severe.  For the reasons above, it’s my view that the market is going to be very slow to recover.  It will though recover as supply and demand align and the economy stabilises and starts to grow again.

Rob Kitchin