Housing completions in the Republic of Ireland or should I say mainly Dublin and a few surrounding counties increased by 19% (on 2018 figures) to 21,500 homes for 2019 according to the Goodbody BER housebuilding tracker. The tracker shows that 6,600 homes were completed in the final three months of last year. While growth in housing is positive unfortunately it is way off where we need to be, according to the Central Bank Economic Letter on housing published 10 December 2019 some 34,000 houses will have to be built each year for the next decade and that is just to meet demand assuming inward migration stays close to current levels.
To address the current housing crisis, the word crisis is apt because that is what it is, I also believe it is what had the greatest impact on the outcome of our election. The ‘Rebuilding Ireland Action Plan’ in 2016 set out an overall target to increase the supply of housing to 25,000 per annum by 2021, 15,000 in 2016, 18,500 in 2017 and 20,000 to 21,000 in 2018, this was coming from what was considered a low base of 12,666 units in 2015, unfortunately the figure of 12,666 was well over estimated and the actual completion figures were closer to 6,000+ units. The problem with the overestimated completion figures means that the requirement to get to 25,000 homes per annum is way too low and according to the Central Bank Economic Letter by Thomas Conefrey and David Staunton “will continue to contribute ongoing imbalances in Ireland’s residential property market”, in summary we have a housing lag which is going to be impossible to correct.
Pre and post-election the three largest parties promised to scale up housing production, Fianna Fáil promised to build 200,000 in the next five years equating to c. 40,000 per annum with Fine Gael jumping on the band wagon with a similar figure, this was followed up by 20,000 public homes each year to meet social and affordable need by Sinn Féin, promising an additional investment of €6.5 billion equating to a similar figure from the other two parties. On the whole an overly ambitious aim by all parties.
If it was possible to ramp up to these levels the market would have done so. There are multiple issues which will constrain the ramping up of house building, available skilled labour being one major issue and increased cost of site acquisition and construction from other areas such as materials, financing, new building regulations and utilities all culminating in overall escalation in pricing. The level of growth we have already seen plus the additional growth a new government will want to put on the market could lead to a choke chain effect as firms fish in a shrinking pool of skilled labour. To sustain that level of growth would require at least a further 40,000 to 50,000 additional construction workers, to be honest I don’t think we can fill those boots with skilled labour from our local resources, that pool is quickly evaporating.
The lack of homes, the cost of housing and rentals, the long commute times, inadequate infrastructure and endless gridlock in Dublin were one element that contributed to political change. A second element was rural Ireland who feel neglected, the lack of infrastructural investment whether that is roads, schools or FDI over the past 15 years has left a very sour taste in their mouths.
As evidenced by the skyrocketing rents in both commercial and residential we have capacity issues, mainly in Dublin but that is where the larger corporates want to be because nowhere else is currently attractive enough. Our roads are grid locked with traffic and our trains bulging to capacity at peak times as workers are pushed further and further away from their place of work. If these problems are not addressed companies and workers may start to look elsewhere to set up home.
The next Government, whatever way it is made up, will have a very big job on its hands to satisfy the Irish electorate when it comes to housing, there is no easy fix.
Article prepared by: Colm McGrath, MD, Surety Bonds.
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