Is there truly a future housing supply problem in Ireland?
Below is the breakdown of the population increase in Ireland between 2011 and 2016.
Total increase in population 2011 – 2016 was 173,613 as per Census 2016:
0 - 34 Years: -72,493 (yes, minus)
35 - 64 Years: +143,932
65 - 85+ Years: +102,174
Arguments in favour of a future housing demand/supply problem:
1. 34,000 new dwellings will be required each year until 2030. Link in note 1 below.
2. 47,000 homes need to be built each year to solve housing crisis. Link in note 2 below.
3. 36,000 new homes needed annually for 20 years. Link in note 3 below.
4. The Labour Force Survey (LFS) reports that there were 221,000 more jobs in Ireland in Q1 2019 compared to Q1 2016. Link in note 4 below.
5. Housing obsolescence estimated at 8,000 per annum or 40,000 every 5 years. Link in note 2 below.
6. Strong immigration will continue to drive demand. Central bank housing demand forecasts of 34,000 new dwellings required per annum are based upon continued net inward migration of 30,000 per annum. Link in note 1 below.
7. Continued reduction in average household size. Link in note 2 below.
Arguments against a future housing demand/supply problem:
1. The LFS reports that there were circa 221,000 more jobs in Ireland in Q1 2019 compared to Q1 2016. However, of these 221,000 additional jobs, 119,000 were in health, care work, teaching or government administration i.e. most likely government funded jobs. A further 45,000 additional jobs were created in construction. Link in note 4 below.
So, it appears that only 57,000 additional jobs were created between Q1 2016 and Q1 2019 that were not directly or indirectly related to either government spending or construction i.e. 19,000 per year. Maybe more were created either directly or indirectly due to government spending or construction, but I used the obvious government or construction probably primarily related job sub-groupings in the LFS so as to make my figures as low as possible.
Government funded jobs are still jobs, but they are dependent upon government revenues remaining robust going forward. Can the Government continue to create additional jobs at this level? How many of the 57,000 additional jobs created between 2016 and 2016 that were not related to government spending or construction were created due to the spending by the people employed in the 164,000 jobs created by the government or in construction?
I fully understand the accuracy of the LFS is open to debate, but it’s all we have to go by for the moment. I also fully understand that some of the jobs I counted as government funded jobs may not be directly or indirectly government funded jobs, but I believe this may be cancelled out by the jobs I did not count that may also be directly/ indirectly funded by the state.
2. Net Inward Migration: Continued increases in net inward migration (as per Central Bank report in point 6 above) will most likely be dependent upon three main sectors:
a. Multinational sector: With upcoming changes to the international tax regime (OECD), Ireland’s ability to continue to attract multinational companies may be impeded over the next 5 - 10 years. There are also only so many Googles and Facebooks. If we do continue to attract multinational jobs in such numbers, changes to the international tax regime or internal EU tax laws (CCCTB) may mean that the state has less corporation tax revenues in future years as we may have to share these revenues with other EU countries, which also impacts point 1 above.
b. Construction sector: As construction workers move from building offices and student accommodation units to building residential units, we may not require the same level of increase in construction workers going forward to increase the number of residential units we can build over the next 5 - 10 years.
c. Hospitality sector: Tourism and international business travel is likely to remain subdued for the next 3 - 5 years, which will impact upon the number of employees we require in hotels and similar businesses. Over the longer term, international business travel may be impacted by e.g. Zoom, international student travel may be impacted by the growth of online learning and tourism from the USA may be impacted as the first generation of Irish-American tourists from the USA declines as this demographic becomes older, less in number or less interested in travel to Ireland.
3. Number of vacant homes in Ireland as per Census 2016: c. 180,000 units. This figure excludes holiday homes of c. 65,000 units. Link in note 6 below.
4. Number of vacant homes in Ireland as per GeoDirectory Survey Q2 2020: 91,067 residential units. Link in note 7 below.
5. Developers reducing prices or removing properties from the market due to slow sales:
a. Feb. 2020 - Sandymount Avenue: “But sales failed to materialise in line with expectations and developer Agricula has withdrawn the properties from the market and returned booking deposits to intending buyers.”. Link in note 8 below.
b. August 2020 - Glenveagh: “Glenveagh chief executive Stephen Garvey confirmed it has started cutting prices on more than 220 properties ranging in price from €500,000 up to €5m. The move forced a €20.3m write-off in the firm’s interim accounts.” Link in note 9 below.
I will update, add to or correct the above as people post their arguments/ corrections in favour or against.
1. 10/12/2019: Central Bank Economic Letter: Population Change and Housing Demand in Ireland. Link: https://centralbank.ie/news-media/press-releases/press-release-economic-letter-population-change-and-housing-demand-in-ireland-10-december-2019#:~:text=Today%20the%20Central%20Bank%20of,Thomas%20Conefrey%20and%20David%20Staunton.&text=Assuming%20a%20lower%20level%20of,per%20annum%20out%20to%202030
4. Labour Force Survey - Breakdown of Jobs by category (Link to breakdown by sub-category is table 2 at bottom): https://www.cso.ie/en/releasesandpublications/er/lfses/lfsemploymentseriesq12019/
5. Link to Census 2016 population data: https://statbank.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=E3006
6. Link to number of vacant homes in Ireland - Census 2016: https://statbank.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=E1071
7. Link to number of vacant homes in Ireland - GeoDirectory 2020: https://www.geodirectory.ie/getattachment/Knowledge-Centre/Reports-Blogs/GeoView-Residential-Buildings-Report-Q2-2020/GeoDirectory-GeoView-Residential-Issue-13-2.pdf?lang=en-IE
8. Link to Sandymount Avenue Sales: https://www.irishtimes.com/life-and-style/homes-and-property/plan-b-for-d4-boutique-apartments-as-buyers-become-renters-instead-1.4161644
9. Link to Glenveagh reducing prices: https://www.independent.ie/irish-news/developer-slashes-price-of-1m-four-bed-detached-homes-and-penthouses-39516239.html