Savills – 132,000 new homes needed

Savills today released research stating that there is a need for at least 132,000 new homes but the loss of twenty-somethings to emigration has a big impact on the housing mix.

Despite net emigration of over 30,000 per annum in recent years, high fertility and longer life expectancy mean that Ireland’s population has increased by 360,200 since 2006.

Calculations by Savills, based on a Census average of 2.73 persons per occupied dwelling, show that this implies a natural demand for at least 132,000 additional housing units.

According to Dr. John McCartney, Economist and Director of Research at Savills Ireland, this is contributing to a rebound in Dublin house prices, and has led to calls for more new construction to prevent the recurrence of a housing boom. However, John argues that we also need to pay careful attention to the type of dwellings we are building.

“An astonishing fact is that the number of twenty-somethings in Ireland has fallen by almost one quarter since 2009, and the decline in Dublin has been even greater. Given that this age group represents the natural market for apartments, there is likely to be a limited demand for additional new apartments beyond the city centre and locations close to public transport links”.

Compounding this, the number of children under 5 has increased by 9.1pc since 2006, while in Dublin the increase has been 14.3pc.

“Again, this militates against the need for too much apartment building in the suburbs – young children need indoor space for their equipment and a private garden area is also desirable, as is surface car parking. Clearly, these requirements are not best met by apartments”.

Because of these dramatic changes in Ireland’s demographic structure the experts at Savills argue that new residential development should be weighted towards family homes rather than apartments. They say there is an ongoing demand for apartments in city centres, in locations close to key transport nodes and in some well-established neighbourhoods where people want to trade down. It is appropriate that planning authorities seek high density development in these locations. But, because of the recent baby boom and the fact that our stock of twenty-somethings is falling, demographics have undermined the natural market for additional new apartments outside of these locations.

While some local authorities have recognised the need for a greater element of family homes, others are still insisting on higher density development in the suburbs. Savills believe that this is curtailing the delivery of much-needed housing supply.

“In many locations it is currently not possible to build apartments profitably. This is because of limited end-user demand and because the cost of constructing apartments is often high due to the provision of underground car parking etc.”

The Savills research notes that, because of sharp declines in the birth rate between 1980-1994, the number of twenty-somethings in Ireland should continue falling until 2025. Therefore, even allowing for some returning migrants, we must get used to the idea of having fewer 20-29 year olds. This has far-reaching implications – for the labour supply, pensions, the retail mix etc. But it also means that we need to plan ahead for an appropriate mix of residential housing.