Dublin Opinion

Last month I wrote a post about the glut of housing in Ireland, and how, as a society, we have experienced a mortgage boom, rather than a simple housing boom. A couple of people have suggested that “holiday homes down the country” account for the large amount of empty Irish housing units. Others have said that supply and demand problems in Dublin are affecting average prices. Finally, there’s the “second home” syndrome, all carving up the empty housing figures.

On Thursday (16 August 2007) the CSO released the Census 2006 Housing Report. When contrasted with the Department of the Environment’s house completion figures, it reveals almost 10,000 unoccupied new housing units in Dublin city, almost 11,000 in Fingal, and 2,000-3,000 each in Dun Laoghaire/Rathdown and South Dublin. In Limerick, a staggering 83% of new housing units have fallen into the gap between new construction and new households. The census report adds to the analysis that the banks, the government, and our housing retail sector in general, have been behind the obscene prices.

The figures below show the amount of private households in permanent housing units - a house, flat, or bedsitter containing one person or more - in Ireland’s cities and its three Dublin county councils, as recorded by the 2002 and 2006 censuses. It is followed by the amount of new households, 2006.

The Department of the Environment’s figures for house completions used below are a merger of public and private housing projects. Also, as both the 2002 and 2006 censuses were held in April of each year, I have taken 25% of house completions in 2002 and 2006 and incorporated those figures into the totals. For example, the amount of house completions in 2002 in Dublin city was 4,124. I took 25% of that figure - 1,031 - and used that as my “yearly total”. 25% is a deliberately conservative estimate. The true figure for unused new housing units is almost certainly higher than the figures below suggest.

With regard to Galway, Limerick, and Waterford, C.C. relates to “City Council”.

Housing is not exactly an abstract concept. It is intensely physical. We know how many houses and apartments were built in each of the city and county council areas, and we know the amount of new households - from single bedsitter inhabitants to South Dublin mansions - as recorded by the census enumerators. We also know from the census housing report (p.5) that the very same enumerators came across around “266,000 residences [that] were vacant at the time of the census while in a further 30,000 cases the household was either enumerated elsewhere or temporarily absent from the State.” These vacant houses/flats/ apartments/bedsitters are spread across the country, in both rural and urban areas. With regard to new housing units in our cities, the general gap between construction and occupation is shown below:

The amount of unoccupied housing units as a percentage of the total constructed is thus:

These figures are quite incredible. In Cork city, for example, there was an increase of 1,224 households since 2002. In the same period, however, around 5,571 housing units were completed. Now, even if every single new household moved into a new housing unit - as opposed to moving into a housing unit that may have been unoccupied in the 2002 census - this leaves around 78% of all new housing units in the Cork city council area with simply nobody living in them. By anyone’s standards, that’s an oversupply, no?

And with a famously open market economy such as Ireland’s, surely an oversupply would lead to a downturn in prices? Here’s how prices have reacted to oversupply in the Irish housing market. (The amounts are the average between new and second-hand prices. I took the average price of a new house and added it to the average price of a second-hand house, and divided the figure by two.)

And the increases in percentage terms…

With supply and demand taken out of the price increase equation, we are left, once again, with a mortgage boom as a key player in the overpriced Irish housing market- available credit has driven prices up, rather than housing demand or short supply. (Another key factor in house prices is land speculation.) People have taken out €400,000 mortgages, because the banks have allowed them. Sellers are getting €400,000 for their houses, because they know the buyer can get that amount from the bank. The recent slowdown in the housing market is because people cannot afford mortgages.

According to Constantin Gurdgiev, Economist & Editor, Business & Finance Magazine

The core issue here is affordability. Basic estimates suggest that the median per capita disposable income in the country today stands at around €31,300 per annum. Factoring in the savings rates and using a 4.5:1 ratio of disposable income to loan value, a median household entering the market today can afford a mortgage of between €380,000 and €400,000. The stamp duty, legal fees and costs of moving the household and upgrading properties cut roughly 15 percent from the affordability threshold. This is a far cry from the latest asking prices – according to Daft’s statistics, “the average family dwelling in Dublin city ranges from €485,000 to €518,000 for a three bed and from €671,000 to €734,000 for a four bed property.”

The slowdown in the market happened last year when asking prices in Dublin broke the €400,000 mark - and not because of bloody stamp duty or surplus issues. The market has run out of mortgages.

Quite simply, the supply of mortgages over €400,000 is what has dropped off. So, what you’re seeing now is houses empty for six months or more as sellers can’t find buyers for their prices.

And that’s a bubble.