Perhaps not unsurprisingly the start of 2014 has been greeted with a number of commentaries in the media concerning the Irish housing market, specifically about the upturn in the Dublin house prices and the possibilities of the start of a new price bubble, and the development of a two-speed housing market between Dublin and the rest of the country.  Part of the impression being given is things might return to ‘normal’ in the capital if issues of undersupply of family homes can be resolved, though the situation elsewhere is less certain given oversupply, demographics and labour market conditions. 

The reality is that housing in general is far from normal across every indicator there is both in and outside Dublin and a rise in house prices in the capital, whilst welcome for those in negative equity, is a symptom of these problems and a lack of a housing strategy to deal with them.   Prices will almost certainly continue to rise in the capital during the year, but it is only when all the other indicators – such as mortgage arrears, housing waiting lists, etc – start to be righted that the market will start to resemble a normal one.  That is likely to take a number of years given the depth of problems at hand.

Here’s the present state of play:

House prices (CSO): Nationally: increased by 5.6% Nov 2012 to Nov 2013 – 46.5% lower than its highest level in 2007; Dublin: increased by 13.1% Nov 2012 to Nov 2013 – 49.2% lower than February 2007; Rest of country: decreased by 0.6% Nov 2012 to Nov 2013 – 46.9% lower than February 2007

New mortgage draw-downs Q1-Q3 (Irish Banking Federation).  2006 (83,860); 2010 (14,289); 2011 (7,907), 2012 (8,582); 2013 (8,711)

Cash sales (industry anecdote): c.50% in 2013

Mortgage arrears for principal residences up to Q3 2013 (Central Bank): 141,520 (18.4%); of those 99,189 (12.9%) are over 90 days in arrears.

Mortgage arrears for buy-to-let (BTL) up to Q3 2013 (Central Bank):  40,426 (27.4%); of those 31,227 (21.2%) are over 90 days in arrears.

Negative equity (Davy Stockbrokers): c.50% in 2012

House building (Dept Environment): 2006 (93,419), 2010 (14,602), 2011 (10,480), 2012 (8,488), 2013 to Nov (7,425).  Of houses built in 2013 (to Nov); 4,274 are one-offs, 2,383 scheme houses, 768 apartments

On social housing waiting list (Dept Environment): 2008 (56,249), 2011 (98,318)

Housing Supply (CSO, Census): Oversupply of property outside of Dublin, with high levels of vacancy (10%+) in all but five local authorities; undersupply of family homes in some parts of Dublin.

Planning permissions (CSO): 2013 up to Q3 – Dublin: 3,116 (houses), 807 (apartments) [3,923] – Rest of country: 6100 (houses), 1035 (apartments) [7,135]; 2006 first three quarters – Dublin 6,482 (houses), 7,153 (apartments) [13,365] – rest of country 87,426 (houses), 8,397 (apartments) [95,823]

Land supply 2013 (Dept Environment): Dublin 2,575 hectares for 132,166 units; Rest of country 11,132 hectares for 262,191 units

Unfinished estates (Dept Environment): 1,258

Pyrite-infected homes (Dept Environment): 74 estates, consisting of 12,250 units.

As I’ve argued previously, we need of a coordinated strategy to deal with all the issues affecting housing in Ireland, including long-term plan of future need, and this needs to be part of a wider National Development Plan/National Spatial Strategy aimed at cross-sectoral recovery.  At present, we just seem to be hoping that the various problems will somehow be corrected through the market or piecemeal, ad hoc or limited schemes, rather than taking a more proactive, coordinated approach.

Rob Kitchin

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This morning the ‘National Housing Construction Index’ was published and posted on the www.link2plans.com website. The report created some excellent publicity for the link2plans website (including on Morning Ireland) which is primarily a commercial endeavour targeted at selling a monitoring service to the construction sector.

So what does this latest report tell us? Predictably over the period 2011 – 2102 there has been a sharp drop in planning applications nationally with the largest falls in Kildare (-41%), Kerry (-39%), Clare (-35%) , Mayo and Louth (-31%). Dublin and Sligo recorded the lowest drop – down just 2%.

However, from a planning and development perspective these figures tell us very little. The index measures planning applications and commencement notices but does not measure the number of dwelling units, commercial floorspace, retail units etc in each, i.e the quantum and type of development. In the case of planning applications, the report also does not tell us whether these were granted or refused planning permission.

A quick look at the link2plans home page points to the real story behind the figures – the majority of new planning permissions/commencement notices are for ‘self-build’ projects, i.e. one-off dwellings. Given the overhang in vacant properties and the insolvent state of the property development sector, financing multi-unit residential development is currently impossible (and foolhardy). Similar to the 1980’s, the only projects which are likely to proceed are those which are easier to finance and with a specified end-user. In fact, the more useful CSO figures last month show one-off houses accounted for 64.1% of all new dwelling units granted planning permission in Quarter 1 2012. In this quarter there was a corresponding decrease of 58.9% and 84.5% in planning permissions granted for multi-unit housing and apartment developments respectively.

The CSO data shows that planning permissions for new dwellings in rural counties are significantly ahead of urban areas and this is also evident in the ‘National Housing Construction Index’. This trend towards counter-urbanisation and housing leakage is storing up serious policy difficulties in terms of implementing the National Spatial Strategy, reducing car dependency, protecting NAMA assets and maximising efficient public investment in infrastructure together with creating sufficient agglomerations of scale to stimulate new employment creation. The average size of a one-off house granted planning permission in Q1 2012 was 2,660 square feet (larger than 2006/2007) which further points to some significant social equity issues.

Economic recovery requires proactive spatial planning. Without reference to the type of development and where it is occurring, a crude measurement of planning permissions and commencement notices tells us very little. While, on paper, planning reforms in recent years have been very significant, there is little evidence that these reforms are being translated on the ground.

Gavin Daly 

The CSO has reported on planning permissions for Q4 2010 and 2010 as a whole.  The number of planning permissions Q4 2010 for houses is down -37.5% on Q4 2009 (3,457 to 2,159), apartments are down -47.6% (1,507 to 790) between the same periods.  The overall difference is -40.6%.  For 2010 as a whole, house permissions are down -56.7% and apartment permissions are down -50% on 2009.  With reference to 2007, and the tail end of the boom, the number of unit permissions in 2010 has dropped -81.5% for houses (62,828 to 11,604) and 68.1% for apartments (21,569 to 6,874).  The total number of planning permissions for all developments Q4 2010 was down from 5,137 to 4,373 (a drop of -14.9%).  For 2010 as a whole, total permissions were down -27.6% from 2009, permissions for extensions were down -16.4%.

Given the state of the economy and property sector this isn’t any great surprise.  Nor is the pattern of permissions, with 43.6% of all housing unit permissions in Q4 2010 for one-off houses.  For 2010 as a whole, one-off houses accounted for 48.1% of house unit permissions (5,582 units).  In 2007, one-off houses were 29.5% of all house unit permissions (18,555 of 62,828 units).  One-off permissions in 2010 are thus down -69.9% from 2007 levels.  In terms of what was actually built in 2010, one-off housing constituted 63.2% of all houses built – 7,914 of 12,514 (DEHLG 2011).

Regardless of the decline in one-off permissions from the height of the boom, a debate seems desirable on how sustainable this pattern of permissions/build is over the long term.  On the one hand are arguments relating to individual rights, culture and ‘way of life’, and on the other, the costs of servicing one-off houses, the costs to the environment and landscape, and the vulnerability of dispersed, long commuting populations to rising oil prices.  This is clearly a contentious and highly politicised issue, but then what planning issue isn’t?  Our strategy so far has largely been to ignore such debates and plough on with a laissez faire approach designed to sate local demand and leverage councillor’s votes.  As for whether we need to be awarding any permissions at all, given the vacancy and under-construction rates of both residential and non-residential property in the state, also seems like a debate worth having – on the one hand, the construction industry is in severe difficulties and needs investment, on the other the solution to over-supply is not more supply (and scare stories about there only being between 1 to 12 months supply in most areas by some vested interests lacks compelling evidence and credibility – see our post here).

One anticipates, given the state of the property market and the lack of access to credit for construction projects, that the planning permission figures for 2011 will continue their downward trend.  At least this might give us some breathing space for thinking about what kind of planning system and pattern of development we want.  The present government’s line seems to be to undo the good parts of the Planning and Development (Amendment) Act, that tried to tighten up the laissez-faire elements, and head back to the planning system that operated during the boom.  If that’s the kind of planning system we want, then we deserve what its outcomes will be.

Rob Kitchin