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Housing is about to change radically - and here's why

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Builders will get a tax discount if they begin work on-site within 18 months of getting planning permission, under plans to be announced in Budget 2015.

Builders will get a tax discount if they begin work on-site within 18 months of getting planning permission, under plans to be announced in Budget 2015.

Builders will get a tax discount if they begin work on-site within 18 months of getting planning permission, under plans to be announced in Budget 2015.

I've been telling people that I am very optimistic about housing in Ireland. I've been saying that we've learned our lessons, that we've fixed a majority of the ghost estates and that the recent increases in house prices are a normal and healthy recovery and are definitely not signs of a bubble.

All of these things can be hotly contested, but only by people who think that a 'recovery' means going back to how things used to be. That'll never happen. The real recovery has already begun - but it's difficult to recognise at first, because it's different. Perhaps surprisingly, this is a good thing.

But why take my word for it?

Writing about housing makes me nervous and often gets me in trouble. I have a history of making early predictions that have proven to be right, but which at the time seem unbelievable to many. In 2006 I told anyone who would listen that Irish property was over-valued by two-thirds and so I sold my property investment to the scorn of all my financial advisors.

In 2011, I received more derision and ridicule for saying, on a TV documentary, that a recovery of Irish property would occur in 2014 - mostly on the east coast - and would do so with the speed and suddenness of a ping pong ball released from under water.

I get it right, when property and financial specialists get it wrong, mainly because I always have an eye on the big picture about the future, both nationally and internationally, and this helps to avoid the dangers of being caught up in the type of group-think that ruins businesses and blinds the media. A lot of this comes from my early work with the DIT's Futures Academy where we examined in detail the future of Ireland, based mainly on population analysis and where this population might be living.

Since I made those predictions, the Government have entrusted me with the Chairmanship of the Housing Agency. This is the body who advise the Government on issues about housing and communities. Now that I have a ring-side view of high quality research and activities I can see, even more clearly, that housing in Ireland is recovering quickly and has a great future. Needless to say these opinions are my own - and not the agency's.

First of all, is there a housing shortage and is this a crisis? The answer to this needs a bit of caution. 'Yes' we need more houses, but 'no' this is not a crisis. Needs and shortages are like hunger and famine: one is normal and healthy, while the other is a crisis.

What is normal? We will always need new houses. Society is always changing and different types of houses in different types of places are needed as society changes. Our kids grow out of their clothes each year and society's housing needs are the same. The Housing Agency have given the Government figures for emerging housing needs - how many, what types, where.

So, we need to build houses, lots of them and quickly. But this is not a crisis and is certainly not a reason to be stampeded into rash and perhaps regrettable decisions.

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Does homelessness mean that we have a crisis? This answer is 'yes and no'. We definitely have a problem because our current models of social housing are changing too slowly to keep up with changes in rents and changes in how we build. But the answer to this is not necessarily a bricks-and-mortar solution. We have very good new models for providing this type of housing but they are proving to be very complex and slow to introduce, but we are getting there.

In the same way as we will never have a hospital without an accident and emergency department, there will never be a time when we don't have a homelessness problem. Crises of one sort or another are a normal part of life and successful societies are judged by how quickly and effectively they deal with issues, such as homelessness, when it occurs. Undoubtedly, we have to become much faster and more effective but the very existence of homelessness is not a crisis.

Increasing house prices is another false alarm often misconstrued as a crisis. Property prices are indeed increasing, as they always do after a crash. But this increase has a natural braking mechanism that is already evident - low house prices caused many people to defer selling or moving but as prices increase the number of sales are increasing too. We were experiencing a shortage of houses for sale - not a shortage of houses.

These changes, together with continuing initiatives by the Government and lending institutions will eventually lift all but the most imprudent out of negative equity traps - though the pace of this recovery will continue to have a marked imbalance between east and west

Financing housing is reported to be a crisis too. Builders and developers have beaten a wide path to the government's door to persuade it that the problem is funding and financing. They can't get the funds they want. But much of this apparent crisis stems from issues like asking for 100pc financing, expecting large short-term profits and incremental cash-flow funding. These are all part of a broken model. When bankers and developers both learn to adopt new ways to attract and sustain funding then much of the present 'crisis' will rapidly evaporate.

The development sector needs to begin to behave like a business in crisis by reducing profit margins and costs and by increasing the quality of their offering. It still doesn't seem to understand that the type of demand is changing and the old 'semi-d' housing estate model is mostly dead.

As the make-up of the Irish population changes (more single people, staying single for longer, for example), it seems we are still not building attractive homes -either for sale or rent - for empty nesters, students, young adults and urbanised hipsters, many of whom are the backbone of the valuable Foreign Direct Investment sector.

The world is awash with both cash and customers, but only for the right product.

Given all this - changing population structure and demand, outdated models of development, wrong product - I am anticipating that the current price increases are a normal correction that will rapidly level off as normal levels of supply recur, mostly because people are confident to sell. This will be followed by building programmes to meet requirements for people setting up new homes. These are all normal activities.

The Government need to avoid being stampeded into old destructive patterns of new buildings to stimulate the economy or accommodate more people. They need to avoid believing that the problems lie with planning or 'sites'.

The real problems are affordability driven by greed and availability driven by impracticality. These are things governments can address very effectively, but they need public support. We need to shout from the roof tops about the need to reduce the costs of building - land, materials and labour; we need to examine how well-intentioned, but unsustainable regulations and aspirations for parking, lifts, stairs and space standards are forcing up house prices.

Housing in Ireland is about to change dramatically.

A much bigger variety of new types of homes will be built by smart professional developers with new funding models. Many will be rented - by choice - from highly professional landlords. Nearly one in five of the population already rent from a private landlord. Most importantly of all, Irish housing will be affordable and will not poison our international competitiveness - by driving up wage demands.

Old types of builder/developers will become a dying breed, buy-to-let amateur landlords, although important, will find it increasingly difficult to compete with the quality of professional landlords.

The next generation will begin to use property, as is common in other countries, as a service and not an investment and our society will have compassion for people at the centre of housing policy - and not investment returns. They'll put their money into things that are, literally, safer than houses - so that no generation will ever again be burdened by that fatal trap of negative equity.

If you're reading this and you're over 45 you'll be shaking your head in disagreement. If you're reading this and you're 20 you'll remember this article when you are 45 and you'll think there might well be something in this. And there is.

Conor Skehan is chairman of the Housing Agency


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