Dublin Opinion

Irish housing statistics are notoriously vague. There is no accounting system for new housing units - rather, the CSO has to rely on figures from the ESB with regard to new connections, and from that it extrapolates the amount of new units.

The CSO’s figures for the amount of mortgages sold is also somewhat oblique, as the mortgages are filed under new and second-hand housing only. It’s going to take a bit more digging, but hopefully the figures are there in bank and building society annual reports or the household bulletins. (The Irish Banking Federation provides such a breakdown for mortgage sales from 2005 onwards.)

There are reasons why the actual figures of sales of houses in Ireland are somewhat vague and abstract. On 3 April 2001, Maev-Ann Wren wrote a piece for the Irish Times which is worth quoting:

In the mid-1980s a colleague and I “torpedoed the property market”, or so we were told. As financial reporters, we had examined the drop in house prices over the preceding 18 months. We documented falling prices on individual streets, even published photos of the houses. Our efforts distressed property interests.
One interested party invited us for a drink (we went Dutch) and sorrowfully informed us that this sort of honesty was not good for “some of us who are trying to keep a market going.”
This was a frank admission that the emperor wore no clothes, that the level of house prices owes as much to belief as demand for houses. If people expect prices to rise, they hasten to buy. If they expect them to fall, they wait for a better bargain. Falling prices is a buyers’ market.
I remember this now when I see estate agents and others with a vested interest in the property market forecasting an increase in house prices. They know that such prophecies can be self-fulfilling.”

Facts are garlic to estate agents. They recoil in horror at empiricism.

With regard to 1981 to 2006, I’m going to focus in on new private housing, and mortgages sold for the purposes of purchasing a new house built by the private sector.

I’m taking on board the assumption that in terms of housing supply a second-hand house purchase is a neutral purchase. Either the original occupants have purchased a new home themselves and have ‘freed up’ a second-hand home, or they have died or emigrated. The purchasing of second-hand homes by owner-occupiers is like a bubble in a carpet: eventually the demand for housing ends up in the new homes market.

So we have here three sets of figures from the CSO. We know the yearly increase in households. We know how many new housing units were built, and we know how many new mortgages were sold.

We should keep in mind that not every household is an owner-occupier household. The CSO and the Census states that :

A private household is defined as a group of persons living together (usually but not necessarily related), jointly occupying the whole part or part of a dwelling house, flat or temporary dwelling and sharing a common budget. A person who lives alone or a person who occupies only part of the living accommodation but does not normally share a common budget with the other occupants is also regarded as constituting a separate private household.

So, the carvery-munching Ikea lovers with a plasma TV and a soulless Semi-D, and the guy in a bedsit on the North Circular Road, with fourteen cans of Dutch Gold and a soiled copy of Nuts, both are households. Both make it into the stats.

Nevertheless, the amount of households edges us towards at least the parameters of demand. There’s no point building houses without households, no?

What we see with the figures for household, loans, and construction, from the 1980s onwards, is a constant oversupply of new housing in the state.

There are other factors to keep in mind, such as the need to replace old/decrepit housing with new structures, as well as second homes/holiday homes.

We know that in 2006, there were 216,533 empty housing units in the state (see 2006 census report). This does not include the number of holiday homes, which stood at 49,798.

Life After NAMA estimates the vacant housing figure to currently stand at 302,625, and again this is exclusive of holiday homes.

When we look at possible oversupply from 1981 to 2006, this is what we arrive at.

When we look at the excess of new housing over new house loans, we arrive at a figure of 297,318. This is about 8% less than the excess of new housing over new household figure, but one that largely follows the same trend over the years.

This is the breakdown of excess new housing over new loan paid out by mortgage providers, 1981 to 2006.

We know that there was a constant build-up of oversupply of housing in Ireland from the 1980s onwards, that the hundreds of thousands of empty units did not suddenly appear with the ‘Bad Celtic Tiger’ of 2002 to 2006, but were constantly being churned out while the estate agents pleaded “demand!”.

How did oversupply affect prices?

To go back to Maeve-Ann Wrens quote from above:

the emperor wore no clothes… the level of house prices owes as much to belief as demand for houses.

Indeed.