Sunday 22 April 2018

Increase in number of homes being built won't solve crisis

House construction way below level needed to meet surging demand

House building by county
House building by county
Hubert Fitzpatrick
Paul Melia

Paul Melia

The rise in the number of homes being built is largely being driven by one-off houses outside the capital, which are unlikely to be sold on the open market.

Official figures show that 5,625 houses and apartments have been completed so far this year - up 16pc, or by 801 units, on the same period in 2014.

Despite this apparent surge, building activity is happening in the wrong areas, and the number of homes being built is still way below that needed to meet demand.

This trend will do little to help the pent-up demand for family homes and contribute to a surge in property prices.

Almost half of the total are one-off properties, while there has been a sharp drop in two of the biggest Dublin local authority areas and a key commuting county.

Just 313 homes have been built in Dublin city, down 36pc; some 141 have been completed in south Dublin, a drop of 43pc, while completions have also fallen in Wicklow by 63pc to 183.

The disappointing figures from the Department of the Environment come after the Housing Agency warned that 21,000 units a year are needed every year to cater for our growing population and to meet pent-up demand.

The Construction Industry Federation (CIF) said almost half of all homes completed in the first six months will never be sold on the open market, meaning that new homes will be at a premium.

House prices continue to rise nationally and estate agents are also warning that new Central Bank lending rules are shutting out families hoping to upgrade to a bigger house.

The CIF said the number of homes it expects to be completed this year will fall well short of the amount needed. "Housing output this year will be less than half that needed to meet demand. It will take time to restore the industry to a sustainable level," said CIF director of housing, planning and development Hubert Fitzpatrick.

"There are still areas where construction costs of a new house exceed market values. Until such time as market values exceed construction costs, there will be little output and you're not going to get speculative housing built."

The figures show that construction is resuming in some areas of high demand, but that the numbers are at worryingly low levels.

They include Cork city, where the numbers completed rose 21pc to 91, but one in four was a one-off home.

In Galway city, just 46 homes were built, up 18pc. Again, one in four were single houses.

The figures also show:

Almost one in 10 houses built so far this year is in Fingal, in north Dublin, where 562 were completed. Of these, just 11pc were one-off.

Another 506 were built in Co Cork, of which 304 were one-off, followed by 356 in Dun Laoghaire Rathdown.

The lowest number were finished in Galway city, at 46. Another 66 were built in Leitrim.

Output fell in seven local authority areas - Dublin City, Wicklow, Wexford, Westmeath, South Dublin, Roscommon and Carlow.

Almost half of all homes built - or 2,693 - are one-off houses.

2,134 homes are in housing developments, and 798 apartments were completed.

The population is expected to increase by 170,000 by 2018, and the falling unemployment rate and rise in consumer sentiment is also fuelling demand.

While the bulk of homes are needed to cater for smaller household sizes, most are needed in the cities. Last year, just 11,016 residential units were completed across the country.

There is capacity for 46,000 additional housing units in Dublin in the short-term, 18,000 of which have planning permission. But securing finance is proving to be a major stumbling block.

The Housing Agency is undertaking analysis to determine if building costs in Ireland are out of line with the rest of Europe, adding to costs.

In 2014, commencement notices, indicating that construction was beginning, rose 64pc year-on-year, and there has been a slight rise in planning permissions in recent months.

Last year also saw the third annual increase in property transactions, but there has been a 10pc drop in the second quarter of this year due to a shortage of properties coming onto the market.

Chairman of the Housing Agency, Conor Skehan, warned that it will take up to 2016 for the market to resume to a normal level of activity.

He also said changes needed to avoid a repeat of the housing bubble were a "slow fix" and required affordable homes to be built in areas where people want to live.

Five stumbling blocks to increasing our housing output


The main stumbling block; banks are simply not lending for development projects. The Ireland Strategic Infrastructure Fund has committed to lending €500m, but much more is needed. Unless developers can source the money needed to finance projects, the housing crisis will continue.


Developers are concerned about restrictions on apartment sizes, particularly in Dublin, coupled with a requirement that each unit is dual aspect, or has at least two windows. It is proposed to amend these rules in the capital for rental-only properties.

Development Levies

 Levies are paid to fund essential infrastructure, but developers say they are set too high. The Government has moved to change the system under the Urban Regeneration and Housing Bill, which would allow levies to be reduced.


In many parts of the country, it is cheaper to buy a home on the open market than build a new unit. Government taxes, including VAT and levies, are adding to costs. The Housing Agency is carrying out an international comparison of building costs to see if they can be reduced.


While there is no shortage of zoned and serviced land, key sites are under-utilised. They include prime urban sites, which will be subject to the vacant site tax.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business