Builders hoarding land to fuel profit
Developers are hoarding land and refusing to build homes in the expectation that rising prices will result in higher profits, the ESRI analysis suggests.
The think-tank suggests that as much as 60pc of the units needed to meet demand are required in Dublin, with the remainder across the commuter belt and larger cities, including Cork and Galway.
But despite house price increases ranging from 20pc in Fingal to more than 50pc in parts of south Dublin, there has been little increase in output. It says that total completions across the capital average less than 2,500 per year, "considerably less that the number needed to accommodate projected demographic change".
The strong increase in prices is a "clear sign" that demand exceeds supply, it says, and rising prices should result in increased supply.
But it adds: "Despite the price rises the Dublin market may still not be profitable for developers. There may be a lack of suitable development land, or developers might be hoarding land for future development given the likely higher price and therefore profit that will be available in the future. Developers may also face financing constraints."
Planning permission is in place for 20,000 housing units across the four Dublin local authorities, and there is sufficient zoned land for an additional 25,000 homes.
The vacant site tax, which imposes a levy of at least 3pc on the value of development land, is designed to increase delivery of units. But it does not take effect until three years after the land is identified as being suitable for housing.