ON census night, Apr 10, 2011, there were just under 290,000 empty houses in the State.
That’s a staggering tally out of a housing stock of under two million. But that figure doesn’t tell you much. It’s only when you drill down into it that a multi-layered picture emerges.
Some regions won’t have any ghost estate or vacancy issues in a couple of years. Others will be dealing with the social and environmental fallout for generations.
Professor Rob Kitchin is director of the National Institute for Regional and Spatial Analysis at NUI Maynooth. He’s been mapping the aftermath of the property explosion for the past five years. The vacant house issue, he says, is playing out in very different ways in different parts of the country.
The first point to make is that in any functional property market, there are always empty houses: they’re up for sale, there’s a gap between tenancies, the occupant has died. There’s a long list of reasons. Base vacancy, as it’s known, usually comes in between 4% and 6%. But in nine local authority areas around the country, the vacancy rate, excluding holiday homes, is in excess of 15%. These counties are Leitrim, Longford, Roscommon, Cavan, Mayo, Sligo, Donegal, Kerry and Galway County. Five of these areas are in the Upper Shannon Rural Renewal Scheme area.
“This scheme was unusual,” says Kitchin, “in that it was an incentive scheme that actually applied to the whole county, whereas most incentive schemes either apply to particular types of property or to particular towns or villages.”
According to the Department of Finance, the scheme was designed to “encourage people to reside in the area and to promote new economic activity”. In reality, it stands as the single policy tool that did more to damage the area than any other.
In A Haunted Landscape, a working paper on housing and ghost estates in the post-Celtic Tiger eras, NISRA points out that between the 1996 and 2006 censuses, more than 30,000 houses were built in the five counties covered by the scheme, while the number of households grew by fewer than 19,000. By fuelling the building frenzy, the scheme ended up grossly distorting the housing market. These counties, unsurprisingly, also have a disproportionately high number of ghost estates.
Of the local authority areas with a vacancy rate over 15% outside the tax incentive zone, all are on the western seaboard: Mayo, Donegal, Kerry and Galway County.
“I think the whole country is splitting up into different kinds of markets,” says Kitchin. He sees three tiers; urban, urban commuter, and rural. One local authority area — South Dublin — has a vacancy rate below the 6% threshold, while five have rates below 10%. They are Fingal, Dún Laoghaire-Rathdown, Wicklow, Kildare, and Meath.
One interesting point here is that while ghost estates have grabbed a lot of headlines, empty units in unfinished estates only account for 8% of the total vacant stock.
“There’s only 18,000 vacant houses in unfinished estates,” says Kitchin. “There’s 230,000 vacant houses that are not holiday homes, so the question we asked ourselves was: what is the rest?”
Kitchin and his colleagues at NISRA have theorised that these units divide into six categories:
* 1. Unsold one-off housing.
* 2. Bereavement properties: houses where the last owner has died but the house is being kept off the market while the estate awaits a recovery in the market.
* 3. The owner may be in long-term care.
* 4. The owner may have had to move away to find employment and again is reluctant to, or can’t, sell due to negative equity.
* 5. The property may simply be up for sale or rent.
* 6. No tenant can be found in the current market.
While these categories may well capture most of the empty housing stock, we simply do not know how many properties fit into each.
Understanding why they are empty is a little easier. With the banks substantially withdrawn from the housing market, estate agents report huge levels of frustration in completing property deals.
“We’re dying a slow death here,” says one estate agent in the south-west who didn’t want to be named. “It can take 30 weeks just get an answer from a bank.”
In Galway, one of the areas with a vacancy rate in excess of 15%, estate agents report that the banks are blocking one sale in two as a result of negative equity.
Colm Farrell is an estate agent in Gort, Co Galway: “I have a situation where I have maybe five offers on houses in an estate, and we just can’t move on because of different issues, and they are all bank-related.”
The other point to make here is that there’s clearly a massive problem with empty investment properties. “We’re an unusual country in our distribution of landlords.” Says Rob Kitchin. “There’s an awful lot of people who own two, three, or four properties. If they haven’t been able to find tenants for them, they’ll be empty”
Trevor Grant is chief executive of Mortgage Negotiators, a post-boom company that helps mortgage holders in difficulty to negotiate restructuring deals with their bank. He estimates that there are €40bn worth of investment mortgages out there. We don’t know exactly how much of this debt is distressed, but last month AIB reported that more than a fifth of their €10bn buy-to-let mortgage book was in arrears, compared to less than 8% on owner-occupier mortgages.
Apartments suffered the greatest price falls from their boom-time peaks, and they are disproportionately represented in investment portfolios. In the boom, buy-to-let mortgages were advanced on the assumption that the rent would cover the interest, and if all came to all, the property could be sold to discharge the debt. Not any more.
Grant routinely deals with people who can no longer afford to pay their property debt. “Their incomes have suffered, they’re struggling to pay their home loan, the rent they’re getting on their investment property has fallen… The cost of owning a property can be extensive: you have the non-principal private residence charge, you now have this property tax and effectively all these charges are building up.”
Grant believes some form of debt forgiveness is essential. ” I think the new personal insolvency legislation will see to that. It absolutely needs to be delivered on a case-by-case basis and because of that, it is going to be a slow and an arduous process.”
Kitchin says that to get the market working again you need to get to a point where people are competing for property. “If you start building before we get to that point, you’ll only be keeping the price flat or going down. We do need to harmonise supply and demand… There’s no point in building additional houses on top of an oversupply…”
Ultimately, though, it’s the economy. “We need job creation,” says Kitchin. “The whole lot comes back to the economy and job creation. A functioning economy will create wealth which will enable people to buy assets.”
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