Now market faces major shortage of family homes
A CHRONIC shortage of family homes is being caused by a logjam of people unable to move house.
Young boom-time buyers and older empty-nesters are stalling recovery in the market because they are either unable or unwilling to move.
The younger ‘negative-equity’ generation can’t afford to sell or trade up to larger homes to accommodate a growing family.
Some 300,000 people are in negative equity, where the value of their home is now less than they borrowed to buy it.
Meanwhile, there is also a reluctance to sell among older people whose children have left home and who could manage in a smaller house.
Instead of trading down and freeing up a family-sized home, they are staying put because they don’t want to sell at a discount.
The double whammy is hitting property market recovery seriously as there are also few new homes being built, according to a new report by housing economist Ronan Lyons.
He said there was a real risk of a shortage of housing in the State’s largest cities – Dublin, Cork, Galway, Limerick and Waterford.
The report, sponsored by the Irish Banking Federation, points out that there is a massive excess supply nationally, but this is largely in rural areas with no great population.
The ‘Housing Market Monitor’ cites a number of reasons for the property-supply pinch, particularly in urban areas:
• There was no pressure on people whose children have left home to move to a smaller house. A higher property tax than the one coming in the summer might put pressure on these people to downsize.
• There is such a shortage of family homes for sale that the majority of the supply is now coming from executor sales.
The economist said that just 8,600 first-time-buyer mortgages were drawn down last year. But between 20,000 and 25,000 people get married every year, with most of these forming new households.
This implied a need for twice the level of house building, Mr Lyons added.
Department of Environment figures estimate that there are 50,000 housing units in Dublin ghost estates. Half of these are occupied, and another 17,500 are at the planning permission stage.
But the monitor found that most ghost estates are far from where people want to live.
This explains why there are even fewer available homes than many people believe.
But Ireland now has two clearly separate housing markets – an urban market and a rural market.
People are also reluctant to buy because they believe property prices will keep falling, Oxford-based Mr Lyons added.
Meanwhile, private residential rents have risen by between 5pc and 8pc in the past year in Cork and Dublin, estate agents Savills said. This is another result of a lack of quality homes for young families to buy.
Separate figures from the Central Statistics Office show an average rise in rents of 3.5pc in the past year across the country.
Ministers are due to meet the Financial Regulator Matthew Elderfield in Government Buildings today about the mortgage arrears problem.
He will be briefing the cabinet sub-committee on banking, which is chaired by Taoiseach Enda Kenny and also includes Tanaiste Eamon Gilmore, Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin.