High cost of land keeps developers from meeting 'real demand' for homes
Land prices need to be 25pc to 35pc lower to allow homebuilders to meet Ireland's true demand for housing, a leading developer has said.
O'Flynn Group chief executive Michael O'Flynn told the Irish Independent that Ireland's residential construction activity may be nearing a plateau because of several restricting factors, from mortgage lending limits to skills shortages.
"The real demand for housing is double what we're permitted to deliver. If we cannot lift artificial restrictions and meet the true demand for affordable housing in our society, we will be forcing more and more households into the rental sector with no hope of saving," said Mr O'Flynn.
His company is building around 1,600 units at 11 sites in Dublin and Cork.
He spoke out after economists suggested Ireland's developers may be scaling back plans amid signs that housing supply is close to meeting demand. Those advancing this view cite a marked slowdown in three areas: growth in property prices; in planning permissions; and in hiring of construction workers.
John McCartney, research director at Savills, said: "The supply side of the market is an empirical fact. CSO data shows that new housing completions have risen sharply since 2014.
"But estimating demand is open to opinion and interpretation... and not everybody can be right."
Mr McCartney said residential completions should top 22,500 this year - up from 18,000 in 2018 and 14,400 in 2017 - but output may level out next year, far below other forecasts that demand could drive annual output up to 50,000.
He compared homebuilding to baking a cake.
"A baker planning to produce more cakes will fill his larder with more butter, eggs and flour," he said.
"Similarly a developer seeking to increase his output would stock up on planning permissions, building workers and sites.
"But after years of strong expansion, we have seen little growth in construction employment over the last nine months, planning permissions have gone into reverse and the pace of land sales could be moderating."
Mr O'Flynn said developers can see their cupboards are half full - and can do little about it.
"We have a lack of suitable and available land," he said.
"If Government had any appetite to address the underlying reasons why land in Ireland is so expensive, I could build an awful lot more."
He called on the Central Bank to raise its cap on mortgage loans to 4.5 times a household's annual income.