Construction industry the only ones to learn lesson from last crash

With the theatre of Brexit on the backburner while the the UK general election played out, attention this week turned to housing.

It appears as though we’ve got a collective fondness for instability in the property market, something illustrated by a Central Bank letter released earlier this week. It said that 34,000 homes will have to be built each year for the next decade just to meet demand. This year, we’re expecting to build just 21,000.

The madness of our property market becomes ever clearer when you learn that we built about 60,000 houses annually in the run up to the crash on average, a figure that fell to just 10,500 a year between 2009 and 2018.

You might expect that property prices would be rising, so significant is demand and so lacking is supply. Not so, however, the Central Statistics Office said on Thursday. Prices are rising at a rate of 0.9 per cent a year, the slowest rate of increase since December 2007. In Dún Laoghaire-Rathdown, seen as a bellwether for the wider economy, prices were down 7.5 per cent over the past year, an increase on the previous month.

On Wednesday, the Economic and Social Research Institute (ESRI) said that prices in the State are “as high as they can possibly go given affordability in the domestic economy”. It also flagged that the cost of supply is one factor that needs to be addressed, music to the ears of the State’s construction lobby group, the Construction Industry Federation.

The CIF was quick to point out that about 41 per cent of the cost of delivering an apartment is related to taxes, levies, the cost of finance and land costs. Unless something is done, it warned, the industry will struggle to meet the requirement to build 34,000 houses a year.

Mind you, the extent to which the industry could meet the requirement even if taxes, levies and costs are reduced is unclear.

The Government might have been expected to step in with a more impressive programme of social and affordable housing by this point. Instead, it has primarily been left to the market to sort out our housing woes. We can all judge for ourselves how well that’s working.

 

Article Courtesy of: Peter Hamillton – (Irish Times) Sat 14th December 2019

Source: www.irishtimes.com