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


Related Articles

Rebuilding semi-detached home soars to €227,440

Reader's Blog: Community ignored in planning row

Survey finds majority do not believe Govt is doing good job on housing crisis

Survey predicts continuing rise in house prices, but at a slower pace


Breaking Stories

Ex-Chicago Spire developer Garrett Kelleher loses appeal over judge's order

Employee focus on ethical issues keeps companies on the righteous path

Improvement of construction sector sees increased turnover of €465m for BAM Ireland

Pound steadies after biggest sell-off since 2016

Breaking Stories

How to make the ‘bad taste’ beauty trend work in real life

The ultimate wish list: 15 perfect presents for kids of all ages

As Hyper Japan kicks off, here are 6 utterly bizarre food trends to come out of Japan

6 wine grapes you may never have heard of that are worth getting to know

More From The Irish Examiner