Monday 23 September 2019

Overestimating demand may lead to new ghost estates being built, economist warns

Luxury developments being prioritised as families struggle to secure mortgages Stock Image: Bloomberg
Luxury developments being prioritised as families struggle to secure mortgages Stock Image: Bloomberg
Donal O'Donovan

Donal O'Donovan

There is a real danger of building new 'ghost estates' as we are overestimating how many new homes are needed in Ireland, a leading economist has warned.

The number of new homes needed each year to match demand may be overstated by as much as 13,000 units -roughly a third - according to new research by Savills.

It means that some speculators who are hoarding sites while property prices rise could be caught on the wrong side of an oversupply - potentially even creating new ghost estates.

A consensus that 35,000 to 40,000 new homes must be built every year to meet new and existing demand is based in part on estimates that 6,000 to 16,000 homes are lost through demolition and dereliction each year and must be replaced.

However, research by Savills chief economist John McCartney shows the number of demolitions is far lower, and they are mainly in rural areas where demand for housing is low. No more than 4,100 units a year are lost through demolition, Mr McCartney found.

Demolition - or obsolescence - rates vary widely from about one in every 200 homes in Co Longford to just one in 2,000 homes in Co Kildare.

His figures suggest fewer than 3,000 replacement homes are needed a year. It means construction output could be 13,000 units closer to meeting demand than thought.

If correct, a relatively smaller boost to housing supply where demand is greatest will have a big impact, including in Dublin and its commuter belt.

Irish Independent

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