Property shortage to last for four more years – bank boss
6,200 new homes on hold due to lack of water and sewerage
Published 31/07/2014 | 02:30
HOUSE buyers face up to four more years of shortages before enough homes are built to meet demand, the head of AIB has warned.
The massive shortage of family homes in Dublin is being blamed for a surge in asking prices, with the cost of buying a house in the capital rising about 25pc over the past year.
The warning from AIB chief executive David Duffy will increase fears among renters and prospective house buyers that the housing market could be years away from a return to any degree of normality.
It came as Irish Water said that a lack of infrastructure – including water and sewage treatment plants – means that in some places desperately needed homes cannot be built even if there are builders ready to do the work.
Taoiseach Enda Kenny has insisted there is no new bubble but has admitted the cost of buying a home would continue to rise for up to two years as supply fails to meet growing demand.
But AIB chief executive David Duffy suggested it could be even longer.
"I think it will take two, three or four years for supply and demand to equalise," Mr Duffy said yesterday at the launch of the bank's half-year results.
But key parts of the country earmarked for growth cannot sustain any housing development in the short term because there is no drinking water or wastewater plants.
An estimated 6,200 homes are needed in the areas without treatment facilities.
Irish Water has warned that a lack of essential infrastructure will hamper development in some areas.
And it says that government plans to build new homes to cater for growing demand will not be met in the near future unless there is major investment.
Estimated housing demand in Dublin stands at up to 10,000 new residential units per year.
Recent rapid price increases have helped those in negative equity but are causing huge problems for young buyers trying to find a suitable home.
AIB said it is working with developers to help finance about 5,000 homes to help plug the housing shortage. Mr Duffy said the housing market was stabilising around the country and urged people not to be "too frightened" as the situation in Dublin was being exacerbated by "six years of not building".
The National Asset Management Agency (NAMA) had already announced earlier this month that it was ready to build 3,000 homes and fund up to half of the country's housing needs over the next five years.
NAMA claims it has access to sites which can deliver 22,000 new houses and apartments over the next five years and it has committed to funding delivery of 4,500 by 2016.
The 3,000 shovel-ready projects are scattered across the city and half are already under construction, NAMA said.
Mr Duffy (inset) was speaking yesterday as the bailed-out lender reported a profit before tax of €437m, compared with a loss of more than €800m in the same period last year, beating expectations and surprising the market.
The taxpayer has pumped more than €20bn into AIB and EBS, acquiring a 99.8pc shareholding in AIB.
Analysts Cantor Fitzgerald said the results had beaten expectations and claimed the bank was continuing to "turn the corner" and benefit from an improving economy.
Bad loans fell by about €2.9bn or 10pc since December, while the number of mortgage accounts in arrears dropped by 6pc, with total accounts in arrears for owner-occupier mortgages down 9pc.
The bank said its tracker book accounts for about 40pc of its Republic of Ireland portfolio and would take about 10 to 12 years to unwind.