Savills warns over house building ‘arms race’

Savills warns over house building ‘arms race’
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Property firm Savills Ireland has said current housing requirement estimates are exaggerated, warning that too many houses may be built if more realistic targets aren’t considered.

While accepting the current acute shortage of housing accommodation and the likelihood of it taking a number of years before supply can better meet demand, Savills Ireland’s director of research John McCartney said current requirement estimates ranging from 30,000 to 40,000 new houses per year are not realistic.

He said population growth expectations are largely based on the recent baby boom, which is unlikely to be repeated. If the higher build estimates are adhered to there is a risk of over-building in 10 years, he said.

“The estimates are predicated on some pretty shaky data and pretty heroic assumptions. I see no cogent evidence of the need for 40,000 new houses per year,” Mr McCartney said, likening the rush to increase build estimates to “an arms race”.

He said despite ESB connection figures throwing doubt over the true level of annual house completions, about 19,000 to 22,000 new houses per year should still be sufficient to meet demand over the long-term.

On a group basis, Savills has said that underlying results for 2017 will be better-than-expected on the back of a strong finish to the year.

In an end-of-year trading statement, the group said that strong results from a number of countries including Ireland had offset a decline in its US operations.

However, another leading housing expert said that the latest figures from new-builds-insurer Homebond on housing starts in 2017 showed that there weren’t enough homes under construction to make up for pent-up demand and the needs of a growing population.

Dermot O’Leary, chief economist at Goodbody, said the Homebond figures chime with those he collects from the Building Energy Rating certificates to show that many more houses will be required before the housing crisis is addressed.

Homebond figures showed it insured 9,466 house starts last year, a large increase from 2016, but well short of the 35,000 that some analysts believe is required each year for the next few years.

According to the figures, 5,063 homes in Co Dublin; 1,122 in Co Meath; and 997 homes in Co Cork were started under the Homebond insurance scheme in 2017.

Mr O’Leary said the latest employment figures underlined the needs of a growing economy and workforce for housing.

The CSO figures from its new Labour Force Survey showed the number of jobs in the third quarter last year had reached over 2.2 million, up 48,100 from a year earlier.

At 6.7%, unemployment in the quarter compared with 3% and 3.8% in the Czech Republic and Germany, the lowest rates in the EU. Irish unemployment last month was revised to 6.2%.

“Of late, some have warned that Ireland’s economy may be in danger of overheating as the unemployment rate looks likely to fall below 6% in 2018.

Today’s data though highlight that Ireland’s labour market is exceptionally open,” said Conall Mac Coille, chief economist at Davy.

Meanwhile, at a presentation in Dublin Moody’s Investors Service said Ireland was more exposed than most in Europe to growth and fiscal shocks, and Brexit and US tax cuts were key risks.

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