Housing Demand and Supply in Ireland

Although there has been much focus on Ireland’s housing boom during the Celtic Tiger years (1996—2006), in fact the Irish housing market had experienced similar levels of price inflation in terms of year on year price growth during the late 1970s, when annual increases of up to 20 % were recorded (amounting to around 300 % growth over the decade 1975—1985) (Fig. 7.1). However, what distinguished the latter boom from that of the 1970s was the scale of the supply response, as well as the depth of subsequent price falls (Fig. 7.2).

The dramatic difference between the two periods implies two questions. Firstly, why did supply become more elastic in Ireland during the mid-1990s, allowing new construction to respond to increasing demand? Secondly, why did the scale of the supply response during the Celtic Tiger years not moderate price growth more rapidly? To answer these questions, it is necessary to look firstly at the scale and geography of the supply response between 1996 and 2006, and secondly to the ways in which the planning system operated to liberate new construction in rural areas without regard to strategic policy settings or underlying (demographic) housing need.

ear on year house price changes and nominal inflation (€)

Fig. 7.1 ear on year house price changes and nominal inflation (€)

1975-2013, new homes (Source: Data from Department of the Environment, Community and Local Government (Various Years))

The Celtic Tiger years saw housing output grow exponentially. New housebuilding increased from 33,725 units in 1996 to 93,419 in 2006 (Table 7.1). To place these figures in context, in 2006 the UK built 209,000 units for a population of 60 million, whereas the Irish output (nearly half of that delivered in the UK) served a population around one-tenth the size (4.6 million people) (European Mortgage Federation, various years).

Ireland, Annual house prices (Euro) and completions 1975-2013 (Source

Fig. 7.2 Ireland, Annual house prices (Euro) and completions 1975-2013 (Source: Data from Department of the Environment, Community and Local Government (Various Years))

However, although Ireland’s population growth was increasing at a rapid rate, the spatial distribution of housing output did not match this growth. Economic growth was heavily concentrated in cities, particularly the second and third biggest cities of Cork and Galway and

Table 7.1 Annual housing completions, Ireland, selected years 1996-2014

Region

1996

2006

2013

1996-2006 % change

2007-14 % change

Dublin

9,446

19,470

1,360

106

-82

Greater Dublin

4,222

10,517

990

149

-84

Other cities

2,878

3,557

515

24

-89

East

4,695

15,602

1,517

232

-87

South

6,571

21,907

2,033

233

-87

West

5,513

21,966

1,886

298

-88

(Conversions)

400

400

0

0

-100

TOTALS

33,725

93,419

8,301

177

-86

Source: Data from

Department

of the

Environment, Community

and Local

Government (Various Years)

Ireland’s capital and largest city, Dublin, and the surrounding region (greater Dublin area) (Norris and Shiels 2007). While annual housing completions did increase significantly in these urban areas between 1996 and 2006 (particularly Greater Dublin), output nearly tripled in the largely rural western region and grew by 233 % in the also rural southern region (Table 7.1).

Applications for planning for residential development show how the pipeline for new housing supply also continued to increase despite the growth in absolute completions (Fig. 7.3). Between 1996 and 2006, the number of successful planning applications increased by 83 % (Department of the Environment, Community and Local Government, various years). However, the pattern of dispersal for these units was also incompatible with geographies of demand. Applications rose by more outside Dublin than within the City. In terms of both volume and increase, the largest numbers were in the South and West & North regions. The increase in planning applications over this period was most pronounced in rural counties such as Cavan (201 %), Donegal (207 %), Longford (167 %) and Monaghan (160 %).

Therefore, one explanation for the failure of new supply to moderate price inflation in the Irish context lies in the mismatch between the economic/demographic growth and the location of new homes. But how and why did the planning system allow this mismatch to occur?

  • 7 Planning Practice, Housing Oversupply and Ireland's Housing...
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Number of new residential planning permissions, 1996 and 2006, Irish regions (Source

Fig. 7.3 Number of new residential planning permissions, 1996 and 2006, Irish regions (Source: Department of the Environment, Community and Local Government (various years))

 
Source
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