Monday 22 October 2018

Trade-off for new home is long work commute

ESRI blames Central Bank for repeat of mistakes made during housing boom

The Central Bank in Dublin
The Central Bank in Dublin
Charlie Weston

Charlie Weston

The country is at risk of repeating the housing mistakes of the boom - leaving families with no choice but to buy homes miles away from where they work.

Lending rules imposed by the Central Bank will force couples into long-distance commutes, and lead to the creation of unsustainable transport patterns, according to a new Economic and Social Research Institute (ESRI) study.

This is the very trend that emerged during the boom and has left a social and economic blight that we are still dealing with, the housing report indicates.

House prices had been rising much faster in the greater Dublin area, but are now levelling off in the urban areas.

Buyers are being pushed to seek purchases in other counties said the ESRI report, which was sponsored by the banks and State bad bank Nama.

The report said the Central Bank restrictions on the amount that can be borrowed and rules on the sizes of deposits needed to get a mortgage, mean prices are surging in counties surrounding Dublin.

This is because the loan-to-income limits may have less impact on purchases in commuter counties where prices have not risen so much since 2013, according to the report entitled 'Housing Supply and House Price Trends'.

This is encouraging people to buy homes far from their workplace, leading to long daily commutes and unsustainable transport patterns.

Associate research professor in the ESRI Edgar Morgenroth said: "The data shows that purchasing patterns similar to those seen during the boom years may re-emerge if affordable housing is more readily available outside Dublin and the other areas of high demand, resulting in unsustainable, long-distance commutes for housebuyers."

And houses that are being built are in the wrong areas. Some 60pc of recent completions were outside the Dublin region, with Cork builds happening outside that city.

There is also a problem with much of the housing development being one-off units.

Some one in five houses in Dublin, and three out of 10 in other cities, are one-off houses.


There is also a decline in large-scale developments, even though they are desperately needed.

The problem of house prices rising at different levels in different regions is now as great as it was during the boom. The ESRI calls this phenomenon dispersion.

"The dispersion of house prices across Irish counties is now as great as it was during the height of the boom," Prof Morgenroth said.

He added that the Central Bank lending limits could force households to seek housing outside Dublin and to "commute long distances, repeating trends during the boom".

The ESRI said house prices had jumped by 35pc since early 2013 alone. And rents have shot up by 20pc in the past three years.

This is a situation that hits lower income households the hardest.

With just 2,500 housing units being built every three months, the increases to the stock of homes is less than half of what is required. And most of the housing is needed in the Dublin area.

The ESRI blamed a lack of building of new homes on planning regulations, and said that despite price rises it is still not profitable for developers to build in Dublin.

Developers were also accused of hoarding land for future development when prices are higher.

Builders were also facing financing constraints, the ESRI said.

Asked about the lending rules, the Central Bank said it was sticking to its previous announcement that it will publish a review in November on the regulations.

The rules were introduced in February last year.

Irish Independent

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