Cantillon: Putting ‘property’ and ‘normal’ together

Not only did the property price bubble of the last decade leave the Republic with an economic hangover, it also appears that its accompanying construction boom resulted in the wrong things being built in the wrong places.

Goodbody economist Dermot O'Leary's report, Irish Property - Foundations of Recovery, published yesterday, shows that Border counties such as Cavan and Monaghan have far too many houses, with vacancy rates of 25 per cent, while Dublin, where demand is building again, has far too few.

Around 45 per cent of apartments built in the Border areas are vacant, while 15 per cent of houses lie empty. In Dublin, the rate is 7 per cent for houses and 19 per cent for apartments.

It is likely to take years, up to the end of the decade, for some regions to work through this overhang, but, in contrast, Dublin is on the brink of bubble-type prices rises, unless someone steps in and begins funding residential construction. According to O’Leary, that someone has to be Nama.

The banks are still not in a position to finance housing construction here on a large scale.

So the only other domestic option would appear to be the agency set up to repair their balance sheets to ensure that they would be able to lend as normal to viable businesses and projects.

And the word “normal” is the operative one here. In order for us to have a “normal” property market, we need a normally functioning economy with large numbers of people back to work and banks that can actually lend money.

The fact that an economist from the private sector is looking to a State agency to provide funding to build houses that are needed tells you that we are a long way from that.