House supply shortage sees queues return

People queueing for the Miller’s Glen houses in Swords, Co. Dublin

By Ruth Baily

Last week saw queues return to the Irish housing market. The launch of 60 new homes in Swords caused headlines as a small queue of purchasers formed five days before the houses were officially launched.

These were scenes the Irish public did not expect to see again given the extent of the housing crash.

But as we now find ourselves with a supply shortage it is easy to see how they could become a more frequent reality. Figures from the ESRI suggest that there will be 8,000 homes formed in the greater Dublin area every year for at least the next seven years. This year 2,000 houses will be completed in Dublin. This has lead to a major supply shortage, one which is likely to continue. The development in Swords is one the few new schemes to be launched in the greater Dublin area in the last number of years.

Those in the market for homes are finding it difficult to get what they are looking for. Prices are rising, and while this is good news for those it has lifted out of negative equity, it is bad news for first time buyers or those who would like to move from their current home.

The best way to solve the problem is with supply. It will normalise the market so people will not find themselves queuing for several nights to get the homes they want for their families. However the barriers to build must be addressed. Builders want to build but can only do so if it is economically viable.

Access to funding is currently a major problem for developers. Banks are only willing to lend 60% of the capital required for a project. This means that a builder must finance the other 40% from their own resources. Given the recent economic climate, few companies have access to these kinds of reserves.

Planning is a major stumbling block. Although there are somewhere in the region of 30,000 planning permissions currently live in Dublin, many of these are not for the kinds of homes now in demand. There needs to be a way that these permissions can be sensitively altered to meet the demands of the market.

Both Part V and development levies need to be addressed. Development levies in many council areas are still at boom time rates. These need to be brought in line with the current economic climate. Part V is a tax on new home buyers. It would be better to have a smaller 1% levy on all house sales which is then ring fenced to provide social housing. While few houses are being built, very little money is being collected from Part V. This is turn has lead to the current shortage of social housing.

Until the current housing shortage is addressed in a meaningful way, we are likely to see queues each time a new development is launched. While last week may have seemed like a novelty, queuing for days to buy a home is no way for a normal housing market to operate.