OLIVER MANGAN: Slowing house price growth still means huge shortages

A new measurement of housing completions by the CSO shows the level of house-building is much lower than previously envisaged.

Using the new metric, there were 14,500 new dwellings completed in 2017, well below the previous estimate of 19,300.

Housebuilding figures were significantly overstated in prior years also.

However, the new 2017 completions figure represented a 46% increase on the previous year, which itself was a 37% rise on 2015 levels. 

In the first quarter of 2018, new completions were at 3,500 units. This is a 27% increase on the same period in 2017. 

So while the new CSO measure shows the level of housebuilding is lower than previously envisaged, nonetheless, it indicates that supply is on a strong upward trajectory.

New housing supply looks set to continue rising strongly. House building starts (measured using commencement notices) were up 15% on a year-to-date basis in April. 

However, housing registrations, which tend to reflect developer activity, have been essentially flat over the last year at below 10,000 units annually.

Other data though suggest that developer activity will soon regain momentum. 

Crucially, while new housing supply is on a strong uptrend, the level of building activity remains well below the projected 33,000 annual units that are required to meet estimated housing demand.

 

Even if the current uptrend in supply is maintained, it is likely to be 2021, at the earliest, before new housebuilding reaches the level of estimated annual demand.

The new completions data indicate that this pent-up demand is larger than previously estimated. It suggests that new housing supply would need to rise to at least 40,000 units per annum before supply and demand start to become more closely aligned.

The shortfall in supply has maintained strong upward pressure on house prices. The latest CSO data show that nationally, prices rose by 13% in year-on-year terms in April. 

The latest surveys from property websites, Daft.ie and MyHome.ie, which are based on asking prices, suggest that house price inflation has peaked.

Slower house price and mortgage growth should not be taken as signs the housing market is coming into balance. 

The key challenge remains to deliver a much greater volume of affordable housing to meet the considerable pent-up demand.

Oliver Mangan is chief economist at AIB

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