Students rentals in short supply for now
Two years ago, I authored a piece for Prime Time entitled 'The Mystery of the Missing Cranes'. Looking across Dublin from the Guinness Storehouse, there was not a crane to be seen. This was the starting point for a piece on why there were so few new homes being built at the time.
If you do the same exercise today, you will see lots of cranes dotted across the Dublin skyline. On the face of it, this seems like the problem has been solved. However, almost all the cranes you see in the Dublin skyline currently are not building new residential space, they are building new commercial space - in particular, new office space.
In fact, so much new office space is currently being built in Dublin that experts predict when it all comes on stream, prime rents per square metre will fall. This is likely to be in 2018 or maybe 2019, but it is a clear indication from Ireland's commercial real estate sector that accessing finance is not the issue. Once you move beyond the office sector, however, the picture is far less rosy. Ireland - and Dublin, in particular - faces an ongoing and worsening shortage of all forms of residential accommodation: from hotel rooms to hospital beds, from studio apartments to family homes, simply not enough are being built.
In the first half of 2016, roughly 5,000 new homes were started nationwide - many of those rural one-offs that will never come onto the market. During the same six months, Ireland needed to build somewhere between 15,000 and 20,000 new homes. So for every three new households being formed, just one new dwelling was started. And in Dublin, the ratio is closer to 5:1.
Last week's column discussed the latest figures from the rental market and, given the time of year, the implications they have for students. Yet another year of double-digit increases in rents means even more students will have to commute longer distances, or stay at home with their parents, or even choose a different college because they can't afford rents close to their first preference.
Thus, the picture for 2016/17 students who have not yet got somewhere to live is bleak. However, there are some signs that the student starting in first year now will have much greater choice of purpose-built student accommodation by the time they enter their final year. Over the last 12 months, a number of planning applications have been lodged and, together with projects earlier in the pipeline, these may mean a significantly more professional student accommodation market by 2020.
Currently, the greater Dublin area is home to less than 10,000 purpose-built student homes. Roughly two-thirds of these are on-campus or official university units. And as of this academic year just starting, there are a little over 3,000 privately supplied purpose-built student units in the greater Dublin area.
Within the next 18 months, projects already under construction should add an additional 1,500 student units across a number of city centre locations. There are a number of other planning applications - including the Point Village and two private schemes in Grangegorman - which may add another 3,500 student units between 2018 and 2020. Together with other possible developments, including by Ziggurat, this suggests a potential trebling of privately supplied purpose-built student accommodation over the coming five years.
How do we marry this hive of activity in the private student accommodation sector with the overall problem dogging Irish residential real estate of high costs relative to income and affordability?
It is true that the vast majority of students spend less than €150 per week on accommodation. However, the supply of student accommodation is so scarce that the new accommodation can target the top 10-20pc of students, in terms of weekly budget, and not worry about the average student. This is why we're seeing private student accommodation being built in the greater Dublin area.
Dublin's higher education institutions do not have the luxury of only catering to high-income students, however. They need to worry about the average student and thus, they also plan to add new on-campus units over the coming five years. The challenge for these organisations, though, is squaring the circle: if new student beds can't be built for less than €200 per week, but the average student can only afford €150, who will fill the gap?
So while there is likely to be good news over the coming years, in terms of student accommodation, the case of Irish universities' own accommodation will show that the underlying problem hasn't gone away. All these new units will ease pressure on the rental market, and for that they're welcome, but that's no excuse for inaction when it comes to high construction cost here.
Ronan Lyons is assistant professor of economics at Trinity College Dublin and author of the Daft.ie Reports