First the glut of new homes, now the shortage

A “potentially serious problem of undersupply” is emerging in areas of the property market and the position is not likely to change until new development is started, attendees at the annual conference of the Irish Property and Facility Management Association have been told.

Aidan O'Hogan, chairman of Property Industry Ireland, the representative body for the property industry which is affiliated with Ibec, told the audience that the current environment is reminiscent of the 1994 market. When demand for property increased at the time, infrastructure and planning difficulties delayed the construction of "badly needed new product".

This, as well as the availability of cheap credit, “laid the foundations for the rapid growth in house and land prices which followed”. A repeat of such a pattern was not desirable, O’Hogan said, advising that new development could help balance supply with demand.

Addressing the perception that there is a huge overhang of buy-to-let properties about to hit the market which will boost supply, O’Hogan said such a view “fails to recognise the fact that almost all of this accommodation is occupied by tenants – who have to live somewhere – so it may lead to apples and oranges as between ownership and rented but ultimately it points to an impending shortage of accommodation”.

O’Hogan also said it’s time to reassess high-density residential planning policies that continue to be pursued by planning authorities, “when it is clear that the market has rejected that model, and desperately wants three- and four-bedroom homes”.

The problem, as O’Hogan said, is that development finance remains in short supply from the domestic banks. So who is going to build the houses?

The National Asset Management Agency is already facilitating the completion of some new developments such as the Grange and Beacon South Quarter, both in south Dublin. However, O'Hogan expressed concern that there could be one "monopoly" player in the market, given "the difficulty this monopoly perception may have for potential occupiers or buyers". he argues that the time has come for a different agency of government to be given the remit of working on the recovery of the property market, "one that is charged not with solving older problems but with coming ones".

He also suggested there could be an argument for reviewing the remit of Nama in order to allow it to potentially sell its properties at suboptimal prices, “to ensure that it is not excessively constrained in taking actions which will have better overall benefits for the wider economy”.