Lack of supply of housing fuels new property bubble
But 18,000 'shovel ready' units - enough for three years - lie idle
Published 27/07/2014 | 00:00
DUBLIN has three years' worth of supply of sites with planning permission available for building homes, but many are owned by insolvent developers who can't get the funds to begin construction. A lack of supply of housing is driving up house prices in the capital, with the cost of buying a house in Dublin surging 25pc over the past year.
Writing in today's Sunday Independent, Central Bank Governor Prof Patrick Honohan has promised to step in and stop house prices in the capital running out of control if the boom emerges.
"We have a toolbox of measures which can be used to cool down credit-fuelled demand. We will not hesitate to use them to prevent bank credit overheating the market," he writes in Sunday Independent Business.
The property bubble has also resulted in claims of the return of gazumping, where homebuyers who have agreed a price are then told a higher bid has come in. The Coalition wants banks to act faster to appoint receivers to bust developers to get their sites moved on to builders with funding.
Analysts believe it is now profitable for developers to build houses in Dublin again for the first time since the collapse of the property market.
New figures provided to a special government committee show there are 18,000 units with planning permission across Dublin city and county - enough new housing supply for three years, if the homes were built.
The bulk of these sites can be 'shovel-ready' for building within three months. Across the four Dublin local authorities, there are another 3,000 units in the planning process.
Taoiseach Enda Kenny warned this week it would take up to two years for policies to speed up the building of houses to make an impact. In the meantime, house prices will continue to rise as supply fails to meet demand.
The new figures were prepared by the Dublin housing supply task force for the Government Construction 2020 steering group at the beginning of July.
The largest number of sites with planning permission is understood to be in Fingal, which covers the north and west of the county.
Government officials believe a large proportion of the sites are held by developers who cannot get funding to start construction because they already have big debts.
These are usually smaller builders, outside the top 200 developers whose assets are being managed by Nama.
The Government is putting pressure on the banks to move more swiftly on builders who are not able to develop land they own, due to their financial position.
The view in government circles is that Nama is acting more efficiently than the banks in dealing with insolvent developers' portfolios.
Another problem is the lack of solvent developers to take on the sites that are freed up. The focus for attracting funding is mainly on bringing in international investors to provide the equity.
The new Irish Strategic Investment Fund is also supposed to provide equity and loans on commercial terms to developers who cannot access finance.
The Taoiseach identified funding for builders as a blockage in the property market this week. Mr Kenny accepted there was "pressure" in the housing market, but denied there is a bubble.
However, he said there would be a particular focus on house-building in Dublin.
Mr Kenny said it would take up to two years for the Government's policies to result in a "visible impact" on the market.
Banks have also been accused of hoarding repossessed properties until the market turns. As of March of this year, banks owned 1,116 family homes and 568 buy-to-let homes, after selling around 200, according to the latest Central Bank figures.
Irish Mortgage Holders Association director David Hall said the Central Bank should force lenders to speed up the sale of repossessed family homes, to help ease supply pressures.
"Banks are completely manipulating the market. They have been praying that this would happen for years and now it's happening," he said.
With the Government blaming the lack of supply, economists have also called for incentives to encourage older "empty nesters" to downsize, vacating big family homes for a younger generation of parents.
Trinity College Dublin economist Ronan Lyons said incentivising older people to downsize to "luxury apartments in good suburbs" would free up the properties most in demand: decent three and four-bedroom homes.