ESRI Research Examines Differences in Housing Supply Issues across Ireland
Today, Thursday 10th March, the ESRI launched “Housing Supply and House Price Trends at the County Level”, which examines housing data for each county in Ireland in order to achieve an accurate analysis of how housing supply issues differ across the country.
The report found that demand for housing is greatest in Dublin, the Dublin commuter counties and other larger cities including Cork and Galway. However, the increase in housing completions recorded between the first quarter of 2013 and the last quarter of 2015 was concentrated outside of these regions.
The disparity of pricing between counties is as large as it was during the boom years, with increases of more than 30 percent in Dublin City, Galway City and Cork City from 2013 in comparison to increases of less than 10 percent in many counties.
Additionally, the report found that increased prices in cities have not resulted in increased supply, suggesting that other constraints are currently affecting the construction of new units.
Commenting on the research, Edgar Morgenroth, Associate Researcher Professor in the ESRI stated “The data show that purchasing patterns similar to those seen during the boom years may re-emerge if affordable housing is more readily available outside Dublin and the other areas of high demand, resulting in unsustainable long-distance commutes for house buyers.”
Disparity in House Prices
- Between Q1 2013 and Q4 2015, house prices increased by more than 50 percent in South Dublin, more than 40 percent in Dun Laoghaire-Rathdown and more than 30 percent in Dublin City, Cork City, Galway City and the Dublin commuter counties. Fingal recorded price increases of 20 percent and the rest of the country recorded increases of less than 10 percent.
- Price increases in Dublin stalled during 2015 but there was less evidence of slowing price growth in the surrounding commuter counties. This may be a result of the introduction of maximum loan-to-value and loan-to-income ratios by the Central Bank. The new measure is less likely to be a binding constraint for house buyers purchasing cheaper houses outside of Dublin.
- Although housing completions have increased since 2013, 60 percent of new units completed during this time have been in areas outside the major urban centres.
- In Dublin an average of 600 new units per quarter, or less than 2500 per year have been completed. This is significantly less than the quantity required to meet projected demographic change.
- A comparison of the current levels of completions with long run trends indicates constraints to supply in city areas, which may include a lack of development sites and higher development costs.
- A greater share of completions is now accounted for by one-off houses while that of multi-development completions, such as apartment complexes has declined. The number of planning permissions for multi-unit developments is also at a low level, indicating that completions of this type of development will not increase significantly in the near future.
Relationship between Prices and Supply
- At the national level, the data indicated that increased prices lead to increased supply. However, when the data was analysed at a county level, this was not the case in Dublin or the Dublin commuter counties.
- This suggests that other constraints prevent new completions in these areas. Developers may be constrained by high construction costs in Dublin, planning regulations that add to costs, lack of suitable development land or may find it difficult to raise credit for larger projects.