Business Irish

Saturday 10 December 2016

Government targets for home building to fall short by 50pc

Ireland desperately needs new housing, but practically none are being built

Harry Leech

Published 06/09/2015 | 02:30

Ireland needs to build 80,000 new homes by the end of 2018
Ireland needs to build 80,000 new homes by the end of 2018

Less than half of the new homes that the State needs will be built between now and 2018, according to the latest figures from the Department of Environment, Community and Local Government. The Government predicts that given likely population trends, Ireland needs 80,000 new homes to be built in the 2014-2018 period.

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According to the Housing Agency report which made the prediction, these numbers are a "minimum requirement" and "do not take any issue of 'pent-up' housing demand".

In the first seven months of 2015, just 4,671 new homes were built. At the current rate, less than half of the new homes which are needed to meet the demand will actually be built.

Commencement figures on new builds between January and July were down 20pc nationwide compared to the same period in 2014.

Property developer Brian McKeown of MKN blames the lack of new builds on the fact that construction costs are higher than the amount buyers are able to pay, due to new mortgage restrictions.

A recent MKN development in Clontarf sold quickly and a development of houses in Swords is likely to do the same. But building higher-density developments, which analysts say is the best means to alleviate the current new homes shortage, doesn't stack up for developers, he said.

"We're just finished a phase of development at a large site, Ridgewood in Swords, where we have 80 houses going on sale" said McKeown. "We also have 56 apartments under construction, but they are going into MKN's rental portfolio because the prices at the moment don't warrant going onto the market, as we wouldn't recoup our construction costs.

"We know what we can build them for, and it makes more sense for us to fit them out and rent them rather than sell them with the current mortgage restrictions.

"Unless I can make a profit, it doesn't make sense for me to be in business, because once we finish one development we need to buy another site to keep going."

Hubert Fitzpatrick of the Construction Industry Federation said a number of different factors are at play in suppressing output, including a planning process that is slow to react to demand and that "availability of development capital is low and the cost of development capital is high when it comes to trying to fund projects".

The CIF also argues that the Government must address taxation on construction. A third of the price of every new home goes to taxes and levies, pushing the cost of the home above what consumers can afford.

"The construction costs of a house are still high and are kept artificially high due to government costs like construction levies and VAT," Mr Fitzpatrick said.

The result is that new developments are not happening in any meaningful way, leading to increased prices in the second-hand homes market, he added, a scenario he described as both familiar and unwelcome.

"What we need is a housing supply that is in equilibrium, where demand can be met with supply. That just isn't happening at the moment. It's not in anyone's interest that house prices rise again like they did in the past", he added.

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