Analysis: House oversupply set to continue

ON census night, there were 1,994,845 housing units in the State — up 12.72% from 2006, when there were 1,769,613. Some 1,649,408 of these units were occupied by the usual resident.

Of the remainder, 289,451 were vacant, 45,283 were empty on the night of the census but usually occupied, and 10,703 were occupied by guests. Of the vacant stock, 59,395 were classed as holiday homes.

The overall vacancy rate, including holiday homes, is 14.5%. If holiday homes are excluded, the vacancy rate drops to 11.53%. In a properly functioning housing market there are always some houses vacant. This is known as base vacancy.

The Department of Environment expect a generous 6% of properties to be vacant at any one time. Oversupply is total vacant stock (289,451) minus holiday homes (59,395) minus base vacancy (119,691).

In Apr 2011, oversupply for the State was 110,365 units, plus the 17,872 units under-construction as reported by the Unfinished Housing Survey undertaken by the Department of Environment (and not counted in the census). Vacancy and oversupply vary geographically, both within and between counties.

The vacancy rate excluding holiday homes is in excess of 15% in nine local authorities — Leitrim (22.26%), Longford (19.96%), Roscommon (19.85%), Cavan (18.62%), Mayo (17.90%) Sligo (16.82%), Donegal (15.92%), Kerry (15.41%), Galway County (15.21%).

Five of these counties — Leitrim, Longford, Roscommon, Cavan and Sligo — were part of the Upper Shannon Rural Renewal Scheme that encouraged tax-incentive led development.

Only one local authority — South Dublin at 5.37% — has a vacancy level excluding holiday homes below the base rate of 6% . Five others have rates below 10% — Fingal (6.71%), Dún Laoghaire-Rathdown (7.56%), Kildare (7.77%), Wicklow (7.89%), Meath (8.43%).

These locations generally managed to keep supply and demand roughly in line with each other and only experience marginal oversupply.

All the remaining local authorities have vacancy rates excluding holiday homes of 10%-15% and have relatively significant issues of oversupply.

What is clear from the data is that there is a wide variation across the country with respect to levels of vacancy and oversupply.

Unfortunately, the areas of high vacancy/oversupply coincide with the areas of low or negative population growth, which would suggest they will suffer ongoing issues of oversupply for many years.

Areas where there is low vacancy will start to correct in the coming few years as long as demand and supply are allowed to harmonise.

That is, we do not start to build until all excess housing has been taken up by purchasers. The lack of consumer confidence, access to credit and weak demographic demand, will dampen this process.

* Professor Rob Kitchin is director of the National Institute of Regional and Spatial Analysis.

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