Much has been said of late about the level of housing development in Ireland, with some concerns being expressed as to whether Ireland’s housing market is oversupplied.
There is no doubt that Ireland has enjoyed a very buoyant period of expansion in recent years, significantly ahead of our European counterparts.
In the past decade alone, we have effectively increased our housing stock by over 40 per cent, which is a significant achievement.
The latest available data shows that the housing stock in Ireland has increased to 1.8 million units. This trend peaked in 2006when construction was completed on over 93,000 residential units, equivalent to building almost 22 houses per thousand of our population.
By contrast, completion levels in mainland Europe ranged from about three to five houses per thousand of the population.
With such a significant uplift in housing stock, it is perhaps not surprising that concerns are being raised about whether we have oversupplied our housing market.
To address this issue, it is important that we view the housing stock level within the context of the population data.
At the time of Census 2006, Ireland had achieved a housing supply of 417 houses per thousand of our population. This is a significant improvement on the position at the start of the period of expansion, when it was just over 334 houses per thousand of the population.
Despite the significant increase in this period, Ireland’s housing stock per capita is still below that of most of our European counterparts, where the average housing stock per thousand of the population stood at 460 per thousand of the population at the end of 2005.
For comparison purposes, it is worth noting that established economies in mainland Europe such as Germany and France would have a housing supply of 461 and 504 units per thousand of the population.
Interestingly, Spain has a housing stock of 522 units per thousand of their population, while developing economies such as Poland and Slovakia would have a much lower housing stock, of 338 and 361 respectively.
Clearly, this analysis suggests that within the context of the wider European market, the Irish housing market is certainly not oversupplied. However, it is worth mentioning that within Ireland, the supply of property differs considerably between different counties.
Some counties, particularly those with a stronger tourist trade, have a higher stock level per capita while others, and perhaps in particular Dublin, have a much lower stock level.
This trend of lower housing density is most prevalent in the eastern corridor and regional centres. The average housing density level in the greater Dublin area, which includes Kildare, Wicklow and Meath, stood at 403 units per thousand of the population, while surrounding counties such as Carlow and Kilkenny also have lower density levels of 400 and 392 units respectively.
The average stock per thousand of the population in Dublin at the time of the last census was 403. Unsurprisingly, the density levels were strongest in the Dublin City Council area at 441 per thousand of population, with lower levels in Dun Laoghaire-Rathdown, Fingal and South Dublin at 399, 376 and 354 respectively.
Such low stock levels suggest that the Dublin housing market is still undersupplied, a factor which will underwrite the performance of property prices in this location in the future.
This county analysis of housing stock also reveals a strong correlation between high housing stock and high vacancy rates in certain counties, while counties on the eastern corridor and the major regional centres display lower housing density levels and lower vacancy rates. This is perhaps best illustrated in South Dublin, where the vacancy rate is only 6.2 per cent.
In conclusion, it would appear that concerns about the housing supply levels in Ireland are largely unfounded - indeed, one could go so far as to say that there are still locations within the country that are significantly undersupplied.
This and the projected reduction in the supply of residential units delivered to the market this year suggest that we may see a more disparate housing market in the future, with above trend price inflation being achieved in locations which have not yet achieved equilibrium in their housing stock.
For the country as a whole, it is fair to say that we have gone a long way to reduce this historical imbalance between demand and supply, a commendable achievement in a relatively short period of time.
Furthermore, the market has now clearly taken a more conservative view as regards the delivery of units, a factor which will underwrite the performance of the market in the medium term. Both of these factors bode well for the future price performance of the housing market, which is positive news for the economy overall.
Marian Finnegan is chief economist with the Sherry FitzGerald Group
Sunday Business Post
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