Attitude to empty properties will shape market (Irish Times)

[Tyrannosaurus]

As the outbreak of war approached in 1939, and Stalin remained inscrutable, Winston Churchill described Soviet strategy thus: “It is a riddle, wrapped in a mystery, inside an enigma.” Much the same can be said of the performance of the Irish housing market over the past 10 years.

The Irish housing boom of the past decade defies a credible economic explanation. In broad terms, the number of new houses added to the national dwelling stock between 1996 and 2006 was almost twice the number of new households formed over the same period.

Yet, despite this imbalance between basic additions to demand and supply, the price of new homes increased 354 times over this 10-year stretch.

This either suggests a near insatiable appetite for domestic property among existing home owners or sustained speculation in the Irish housing market, for a house is no longer only a home, it’s also an investment property.

Key housing trends over the past decade are outlined in the table. Housing completions numbered 33,725 in 1996. Thereafter, they climbed at an accelerating pace, reaching a peak at 93,419 completions last year.

Overall, 608,000 new homes were added to the Irish housing stock between 1997 and 2006, with more than one quarter of a million units constructed in the last three years alone. By 2006, the number of dwellings in the country had risen to 1.77 million, an increase of more than one half on the housing stock a decade earlier. This represents a substantial addition to the supply side of the housing market in anybody’s language.

On the demand side, two demographic trends have favoured house building over the past decade. First, the population of potential first-time home buyers rose rapidly. Enhanced by strong net immigration inflows, the population aged between 20 and 34 years expanded from 813,000 in 1996 to 1.065 million in 2006, an increase of 252,000 or 31 per cent. Almost half of all new homes are bought by first-time buyers and four out of five of these are under the age of 35.

The second important demographic trend that shapes new housing demand is the rate of household formation.

According to census data, the number of households in the country increased from 1.12 million in 1996 to 1.47 million in 2006, an increase of 350,000 households, or 31 per cent over the decade. Again, while this represents rapid growth in the derived demand for housing, it falls far short of the 600,000 housing units added to supply over the decade.

Thus, demographic factors alone simply do not adequately explain the scale of housing demand and spiralling house prices over the past decade.

Affordability has decreased, with the ratio of repayments to net income rising from 23 per cent in 1996 to 31 per cent last year. However, longer mortgage terms, the advent of 100 per cent mortgages and intergenerational wealth transfers that provided the cash for deposits on new homes have eased affordability strains.

All of these factors, however, only explain why young first-time buyers can continue to purchase new homes in the face of rocketing house prices.

We are still left with the problem of explaining the gap of 250,000 housing units separating an addition of 600,000 new units to supply from additional core housing demand of 350,000 arising from new household formation over the past decade.

The answer is investment demand, powered primarily by expectations of substantial future capital gains. For this reason, it appears that over the past decade, investors were not only buying to let, but buying to hold. As a result, there are a lot of empty houses and apartments.

The 2006 census discovered that 266,000 houses and apartments across the country were vacant. With the dwelling stock at 1.77 million units, this represents a national vacancy rate of 15 per cent. Holiday homes accounted for 50,000 of the total. When these are excluded, that still left 216,000 other housing units empty.

Of these, 46,000 houses and apartments in Dublin were vacant on the census date, almost 10 per cent of the county’s total housing stock.

Thus, in the period ahead, both the performance of house building and the trend in house prices will be determined not only by new pressures on affordability – primarily a function of interest rate changes – but by investors’ decisions on retaining or disposing of their existing housing portfolios

[2Pack]

as I often said

Its the Empties Stoopid

and we are now at over 300k empties, I would estimate between 330k and 350k .

The IT underreported the figure which was 275k full time empties in April 2006 + 25k ‘temporary absences’ = 300k in reality.

[Duplex]

My God the Irish Times dares to lift the blanket covering the stinking fetid corpse (the Irish property market) lying in the corner of the room. I guess trying to cover the smell with scented gushing articles insisting that the market was in the rudest of health was no longer plausible.

Yes that’s right Irish Times, it was an enormous speculative bubble staring you right in the face, eyeball to eyeball, screaming. I’M A BUBBLE, I’M A BUBBLE, I’M A humongous BUBBLE AND I’M GOING TO BURST!!!

[Blue_Horseshoe]

Interesting from the Times … the article reads like something written by UberBear David McWilliams.

Blue Horseshoe

[robd]

@Blue Horseshoe

Interesting from the Times … the article reads like something written by UberBear David McWilliams.

Blue Horseshoe

I don’t know. I wouldn’t under estimate the mainstream media’s ability to tell people what they want to hear.

I believe public sentiment has turned undoubtedly negative. This article reflects that change of sentiment.

Talk it up, talk it down afterall.

[Poacher]

@robd

@Blue Horseshoe

Interesting from the Times … the article reads like something written by UberBear David McWilliams.

Blue Horseshoe

I don’t know. I wouldn’t under estimate the mainstream media’s ability to tell people what they want to hear.

I believe public sentiment has turned undoubtedly negative. This article reflects that change of sentiment.

Talk it up, talk it down afterall.

Excellent point - while being in many ways the only decent domestic newspaper, many of the IT readership segment are of the “savvy” variety. If they decide withdrawal from property is now a “no-brainer” on the way down in the same way it was “shrewd” on the way up, their chosen media outlet will be the first to reflect this. On most domestic issues there is few better indicators of the elite mainstream mindset than the line taken by the IT. As you have pointed out, if they have now taken the lead and gone ultra negative on property, the rest will follow in time.

[Enceladus]

Excellent article. Well researched and structured and describes the speculative madness that inflated the Irish property bubble. Cool and calm reporting of the facts and an analysis that explains the bubble in a nutshell. Who was the author?

Public sentiment has definitely tipped over into negative territory since the start of this Summer - denial is now moving to fear.

[mambo]

@The Irish Times

…the price of new homes increased 354 times over this 10-year stretch.

“increased 354 times”?!?!? what the hell does this mean (increased 354%, increased by a multiple of 354, increased on 354 separate occasions, etc). you would expect more precise language from the “newpaper of record”

[Tyrannosaurus]

finfacts.ie/irishfinancenews … 5142.shtml

The CSO also said in the analysis of Census 2006,that there were 266,000 vacant dwellings in 2006 representing 15% of the total housing stock.

Of these, 175,000 were houses, 42,000 were flats and 50,000 were classified as holiday homes. County Leitrim had the highest percentage of vacant dwellings (29.3%) while 11.7% of dwellings in Dublin City were vacant at the time of the census.

There were 140,000 vacant housing units according to Census 2002.

Goodbody Stockbrokers said last month that since April 2006, there have been some 148,000 housing units completed in Ireland, but only 86,500 mortgages were paid out for the purposes of purchasing a new home.

While some of these homes would have been bought without the use of a mortgage, it is clear that there has been a significant increase in the inventory of new homes over the past two years.

The Property Pin says that there are 350,000 vacant houses today - - 17.6% of the overall housing stock.

1. 35,000 unsold new homes as claimed by the Construction Industry Federation.
2. 60,000 holiday homes.
3. 255,000 accumulated housing units from past output.

The rental sector comprises 300,000 units:

Private Rented Furnished and Unfurnished 145,000 Homes,
Local Authority Rented 105,000 Homes,
Voluntary Body Rented 50,000 Homes.

Ireland has in effect more empty housing units than rented homes of all kinds.

Finfacts have some absolutely great graphs and figures in that article!
What do we estimate the empties to be currently! SCARY

[Open_Window]

330K +

[lord_vader]

stop right there, didnt uncle tom say there were only 3 empty houses in ireland of which 2 were for horses

[narcissus]

350.000 vacent properties and the population at best stagnant. Its an absolute disaster.

Send in the clowns.

[Mrs_Mac_Pee]

The clowns are already in. They are sitting pretty in their gilded cages on Kildare Street.

[Penates]

I expect Country Tom will be on the radio tomorrow bleating the line of only 30,000 empties and no ghost estates…

[gaius]

Is this the first time that the mainstream media have actually published 250k+ empties figures?
Finally somebody is starting to ask the right questions.

I remember when I said it to an obnoxious taxi driver a few months ago and he nearly crashed the car in shock.