No quick fix for Ireland's broken housing market
With virtually no new building, a trickle of mortgages, tiny numbers of second-hand houses being sold and high vacancy rates, Ireland's housing market is broken
For anyone who still had any doubts about the extent of the problems facing the Irish housing market, last week's paper from the Central Bank showing 60pc of all transactions in recent years have been cash deals, should have served as a wake-up call.
Eight years on from the bust and there are still very few signs that things are getting any better in the housing market.
New housebuilding peaked at over 93,000 units in 2006. By 2013, output was down to just 8,301, a reduction of 91pc. While there has been a slight recovery since then - 12,666 new houses and apartments were built last year - this is still only 60pc of the 21,000 units a year that the Housing Agency estimates is required to meet underlying demand between 2015 and 2017.
At the same time as new housebuilding has collapsed, the supply of second-hand houses being offered for sale has also dried up.
In 2011, just 18,376 out of a national total of just over two million properties changed hands. This was the low point, and there was a gradual recovery in the years that followed with the volume of housing transactions climbing to 48,742 by 2015.
That was almost certainly the high point.
Housing transactions in both the second half of 2015 and the first half of 2016 were lower than for the same period 12 months earlier. If the 7pc reduction in housing transactions to 20,688 recorded in the first half of 2016 is sustained for the full year, then the number of houses changing hands this year will fall to just over 45,000 - the equivalent of every house in the country changing hands once every 45 years. Despite the expensive bank advertising campaigns designed to convince us to the contrary, the banks are to all intents and purposes out of the mortgage lending business.
Way back in 2006 new mortgage lending was a massive €40bn. By 2014 this had fallen by over 90pc to €3.8bn. While there was a 25pc increase in new mortgage lending to €4.8bn in 2015, this recovery seems to have run out of steam - with new mortgage lending growing by 8pc in the final quarter of last year and by just 2.5pc in the first quarter of 2016.
The latest Central Bank figures show that the total value of mortgages outstanding (both residential and buy-to-let) fell by a further €4.8bn or 4pc to €1.26.5bn in the 12 months to the end of March.
In other words, even with the increase in new mortgage lending recorded last year, two euro of existing loans are still being repaid for every euro of new lending being drawn down.
And then there are Ireland's extraordinarily high vacancy levels. When in May the Housing Agency produced a report showing that 230,000 houses (excluding holiday homes) were vacant, more than 11pc of a national total of just over two million houses, it was widely criticised for using figures from the 2011 census.
Now that the preliminary 2016 results are in, it can be seen that the situation has barely changed - with 198,000 houses out of a national total of 2.022 million (almost 10pc) still vacant.
Based on the Housing Agency's estimate of an annual requirement of 21,000 houses, that's the equivalent of almost 10 years' supply.
Vacancy rates are much lower in most other countries, with less than 1pc of homes in England and Wales being vacant for more than six months, while 1.5pc of homes in the Netherlands have been unoccupied for more than 18 months.
While vacancy rates are lowest in and around Dublin and the big cities, there are still large numbers of vacant houses and apartments in the major urban centres, with the Housing Agency estimating there are more than 38,000 vacant properties in Dublin city and county; more than 8,000 empties in Cork city and suburbs; more than 4,000 empty homes in Limerick and 3,600 vacancies in Galway.
While these vacancy estimates will probably have to be adjusted downwards when the detailed census results become available, that's still a heck of a lot of houses.
The problem with the Irish housing market is not just one relatively easy to fix logjam: everything is broken.
"When crises occur, the whole thing seizes up at the same time. There is only a gradual realisation that it is all inter-connected. It is only when one addresses everything together that things start to get moving again. And there is no magic bullet," says Housing Agency chairman Conor Skehan.
The crisis has exposed the poor quality of the data available on the housing market. Until the establishment of the Property Price Register in 2010 there was no accurate data on transaction volumes and prices. We still have no up-to-date statistics on vacancy rates, being forced to rely instead on census data that can be over five years old.
Most mortgage lending data still comes from the banks. While the level of mortgage drawdowns does provide a useful indicator of the true state of the housing market, in the past the banks have not been above "spinning" mortgage approval figures - approvals which, given the lack of housing supply, often saw multiple would-be buyers bidding against each other for the same property.
"The first thing we need to do is to get the data right - so it's not being supplied by people with skin in the game," says Mr Skehan.
So with all of the moving parts apparently jammed, how does one fix the housing market?
Earlier this month, the Government published its 'action plan' for housing and homelessness. It set a target of building 47,000 social housing units by 2021 and doubling annual private sector housing output to 25,000 within four years.
The problem with setting such ambitious targets is that cranking up construction output will take time, at least two to three years. What do we do in the meantime?
"We can free up vacancies. We stop people becoming homeless by dealing with mortgage arrears," says Mr Skehan.
"We can definitely solve the housing crisis. The question is when."
Sunday Indo Business