If we need 80,000 new homes where are they?
Demand for housing is expected to soar over the next five years, so why arent more houses being built?
Construction in Dublin during the boom. Photograph: Bryan O’Brien
Dublin in 2014: many in the construction industry say it is not economocial to build now. Photograph: Brenda Fitzsimons
The recent explosion in property prices in the Dublin area, combined with the latest finding that almost 80,000 housing units are required over the next five years, raises the question of why the construction of new developments is not happening at a pace. Whichever way you look at it, it’s a puzzle. If, as we’re being led to believe, first-time buyers are clamouring to get on the property ladder and almost 10,000 new houses are required nationally this year alone, why isn’t someone meeting this demand – and making a quick buck in the process? It may be a case of two plus two doesn’t always equal four.
The concern about new development comes against a background of rising prices in the capital, with estate agent DNG the latest to weigh in on the issue, reporting that Dublin prices rose by a hefty 8.9 per cent in the first three months of this year.
And tight supply is a contributing factor. According to property portal myhome.ie, in the first quarter of 2011, some 6,792 properties were for sale in Dublin. Fast forward to the same period in 2013 and this had dropped by 47 per cent, falling further to just 3,010 for the first three months of this year.
“It’s no surprise to anyone close to the property market that there is a potential for a housing crisis in the not too distant future,” warns Michael Walsh, head of legal firm Byrne Wallace’s property practice.
So why isn’t there more construction taking place? To start with, funding remains tight, with banks still reluctant to lend for property.
And where finance is available, Jimmy Healy, public affairs manager with the Construction Industry Federation (CIF), says that developers have to put up 50-60 per cent of the equity themselves, which is “making life difficult”.
Strategic development zones
Where development is happening, it is often being funded through other sources – New Generation for example, which is launching a new development in Sutton, north Dublin, is funding its developments itself, with the backing of cash-rich investors.
This begs the question as to why cash- rich international investors aren’t spotting an opportunity to come in and build in Dublin. After all, US property outfits such as Kennedy Wilson are happy to acquire completed or partially completed apartment blocks, so why not build from scratch?
But it’s not just about funding. The industry says that it is simply not economical to build – despite the fact that land prices have plummeted.
Walsh points to the experience of developer clients who have land banks and “are simply saying that it’s uneconomical to develop”.