Friday 24 January 2020

Brendan the Builder is busy, but he's not building houses, only office blocks and extensions

Price rises are now back in double-digit territory for the first time in two years. Stock image
Price rises are now back in double-digit territory for the first time in two years. Stock image

Charlie Weston

Builders are busy again, mad busy. The breakfast roll is once more in demand from legions of lads in hi-vis jackets and boots with steel toe-caps.

But most of the builders are busy on the wrong types of project. They are engaged in building office blocks or involved in house renovations.

The latest crane count in Dublin has hit 70.

Amid all of this furious activity we risk a new housing bubble, because too few construction projects involve house building.

This is pushing up demand, and prices, to unsustainable levels.

Just over 200 new homes were bought in April compared with 10 times that number of second-hand homes, according to Revenue and Central Statistics Office figures. And yet many second-hand homes are slow to sell, as elevated prices put off buyers.

The latest figures show prices rose by a scary 10.5pc in the year to April. Prices rose by 1.1pc in the month of April. In Dublin, residential property prices increased by 8.2pc in the year to April.

But higher price rises were recorded outside the capital, with a surge of 13.4pc.

Price rises are now back in double-digit territory for the first time in two years.

And experts are worried.

Both the Fiscal Advisory Council, which was set up to warn the Government of risks to the economy, and the Organisation for Economic Co-operation and Development (OECD) have warned about the property price surges. The OECD has referred to the worrying prospect of another housing bubble.

"The sharp rise in prices and lending raises concerns that another bubble may be forming, and the authorities should stand ready to tighten prudential regulations if needed," it said.

In other words, if price rises and lending get much more heated then the Central Bank should restrict the lending banks can do.

The solution is to switch from building so many offices to building homes, and build them rapidly.

Apartments are the obvious quick-fire solution, particularly in urban areas where the majority want to live. Developer Cairn Homes revealed recently that there is office space for 60,000 people under construction in Dublin at the moment.

However, just 1,000 apartment units are being built, as it is not viable for developers to construct apartments at the moment.

Trinity lecturer and property economics expert Ronan Lyons blames rules imposed on apartment developments by local authorities.

Strict regulations, such as a demand that every apartment unit has a parking space, particularly in Dublin, mean it is more profitable to put up office blocks than apartments. That needs to change. And the Government needs to radically change tack to stop tax and other policies favouring investors in housing and offices over home buyers.

Otherwise, Brendan the Builder will continue to be more likely to be engaged in constructing offices than new homes, creating the risk of a new property bubble.

Irish Independent

Also in Business