Property & Mortgages

Friday 25 July 2014

House prices to rise 30pc in city shortfall

Taoiseach hopes a rebound in construction industry will lay foundations for 'year of jobs'

Published 22/12/2013|02:30

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Taoiseach Enda Kenny said the number of family homes being built needed to treble to 25,000 a year
Jan O'Sullivan,TD,the Minister  for Housing  and Planning  at the announcement of the  Government's 150 million Euro investment in Infrastructure and Jobs  at a press brefing held in the Department of Public Expenditure and Reform yesterday.Pic Tom Burke 5/6/13
Jan O'Sullivan,TD,the Minister for Housing and Planning. Photo: Tom Burke

PROPERTY prices in the capital are set to soar up to 30 per cent next year because of a chronic shortage in family homes.

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The Government last week announced that 2014 would be the "year of jobs". Taoiseach Enda Kenny said the number of family homes being built needed to treble to 25,000 a year.

However, industry sources told the Sunday Independent that supply next year would struggle to exceed 8,000, creating a huge demand for houses that will result in rising prices.

The Government is hoping an uplift in the construction sector will be sufficient to meet pent-up demand for family homes as opposed to apartments, but also to help provide a boost to the domestic economy.

Last week's figures on third-quarter growth show the sector has already expanded 15 per cent from the same period last year.

However, construction industry and financial sources warn that a shortfall of up to 16,000 homes will emerge next year and in 2015 because of the high cost of building and a lack of access to finance.

There is a consensus across the banking and construction sectors that 2014 will see prices spike by at least 20 per cent, with properties in some of Dublin's more affluent areas likely to increase by up to 30 per cent. Prices in other major cities like Cork, Galway and Waterford are also likely to increase, but not to same degree.

Prof John FitzGerald of the Economic and Social Research Institute (ESRI) said house prices, particularly in Dublin, would "continue to rise significantly until supply responds".

He told the Sunday Independent: "There is a concern that the finance is not there and the Government must fix the banks and solve that issue. Given the economy has recovered faster than expected, the pressure to meet the demand will be greater, sooner than expected."

Mr Kenny said he expected a "serious improvement" in the construction sector next year.

"I think we are seeing evidence of this already. There is a need for 20,000 to 25,000 houses a year," Mr Kenny said.

The Taoiseach has acknowledged there needs to be a facility for builders to access credit and signalled there would be further non-property based measures to help address the demand.

"There needs to be a facility for builders to access credit, to develop the sites, build the houses and have a stream of income coming through. There is quite a deal of interest in the commercial sector to improve the sector," Mr Kenny added.

Robert Ganly, managing director of Ganly Walters estate agents, said the shortfall of suitable homes in the right areas was clearly driving prices up. "There most certainly is a pent-up demand there in Dublin. We have seen price increases more than what we thought would happen, by between 18-20 per cent this year. We will see further rises into 2014, because of the lack of supply," he told the Sunday Independent.

He said there was not sufficient lending to the small builders who want to build the needed houses, and said demand could push prices up by up to 30 per cent, if lending was made available.

Mr Ganly also rejected claims by Housing Minister Jan O'Sullivan that there was "plenty of planning" around Dublin, saying none of the permissions are in the area where people want to buy.

The Government has signalled that further measures to stimulate the construction sector are likely in the New Year. It is also seeking foreign investors to build badly needed family-home developments in the capital to ease chronic shortages.

To remove the bottleneck, the Coalition wants to move away from the building of 'shoebox' apartments, particularly in Dublin, towards family housing. Aside from regular semi-detached houses, there is also a push for large three- and four-bedroom family-sized apartments.

The planning system will also be made less restrictive in an effort to get the construction industry moving -- with a focus on the length of time for an appeal to An Bord Pleanala. The Coalition will publish a special plan for the construction industry in February.

BY DANIEL McCONNELL

Irish Independent

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