Irish Property Market chat II - *read mod note post #1 before posting*

No, it doesn't ignore vacants and airbnbs - these would be accounted for in the 6% I allowed for spare capacity:

Obviously it is not that simple because in order to facilitate a healthy turnover of stock in a functioning market you need some spare capacity at all times - this is in the region of 6% of housing stock equating to 127,475 units.

Re holiday homes - I think the housing stock figure does not include dedicated holiday homes, ie those which are restricted by planning for holiday home use only. I will check that. I'm not sure how many that is of the total holiday home figure.

You're correct it doesn't account for Ukrainians hence why I said figure would have reduced since April 2022.

The average household size decline is an in interesting one - a lot of the upper estimates of new builds required is predicated on the assumption that we will converge with the European average household size which is much closer to 2.

Does that theory really stack up?

Our household size is larger which because our housing stock is made up of larger properties. We have a lot more houses than most of Europe who have a lot more apartments.

Are there really a ton of people in Ireland living in 3 bed houses who are yearning to live in small apartments? It seems unlikely.

So if the case is we need 50k plus apartments per annum in order to meet demand for smaller household sizes then I think the maths holds up.

But the developers will tell you they won't build them because everybody wants to buy 3/4 bed houses. And we certainly don't need 65k 3/4 bed semis a year!

The vast majority will be second home/vacant investment/probate etc but as mentioned that sort of stock usage accounted for in the 6% of spare capacity you'd expect to find in a functioning housing market.

The point I am making that is if you look at the best available data we have on existing housing capacity in Ireland, you would not expect to see a shortage of supply on the market. In that context I think Skehan's warnings about oversupply are not as crazy as they sound.

I think we're so fixated on the solution of ramping up new build supply, that we're totally ignoring the other biggest cause and thus potential solution which is turnover of existing stock - i,e people buying and selling existing 2nd hand stock.

The turnover of existing stock facilitates a big game of musical chairs within the housing market. A healthy turnover rate ensures the most efficient allocation of both the stock and the capital in the market.

In a healthy market people buy and sell when they want to, need to, or when they have to. Everybody's wants/needs/finances are different but in the whole they are all moving up/down/sideways and there is something for everyone. This is enabled largely by a proportion of existing property owners selling and buying.

For 15 years or so existing property owners have not been selling in anything like the numbers you'd expect. I think the root cause of this goes back to negative equity/bank issues but thats had a knock on effect that has been getting worse every year, and thus the housing market turnover rate has been extremely low by historical standards.

These sort of things tend to revert to the mean over time, but in order to do so it means at some stage the turnover rate will exceed the historic average for a period of time. It's just a release of pent up supply, built over 15 years. An increase in turnover will have the same knock on effects in reverse as the decrease has had. It could feel like we're in an oversupplied market very quickly.

In all the talk about the housing market you never hear anything about the low turnover of existing stock, it's quite odd.

Sure a high number of holiday homes and higher vacancies in Donegal, Mayo, Roscommon etc compared to Dublin would be entirely expected.

The CSO has released vacancy data from 2022 - https://www.cso.ie/en/releasesandpublications/ep/p-cpr/censusofpopulation2022-preliminaryresults/housing/

Dublin as a whole running at 5.5% of stock. The interesting thing is how skewed the rates are by individual areas. If you look at the LEA map you'll see the highest values areas of Dublin have the highest vacancy rates - many in excess of 10%. The cheapest areas - Ballymun etc - have rates under 3%.

So at a national level it's location, location, location - high vacancy rates are expected in lowest value/demand areas. They're vacant because nobody wants to live there.

Whereas in Dublin, where the housing crisis is most acutely felt, it's the total opposite - the highest vacancies are in the highest value/demand areas.

Another interesting about Dublin is that pre-Covid, about 2016-19, it was the only county in which the number of holiday homes increased year on year. Again that might be unexpected.

You can do the same housing stock/avg house size/population calculations for Dublin:

So not quite as damning. Oversupply is only about 1%, a rounding error in such matters.

But bear in mind it is oversupply nonetheless. The 6% base rate spare capacity is what you would expect in an efficiently functioning market with a healthy turnover leading to a healthy supply of sales and rental stock.

Sure if you're trying to buy a house right now, the fact that people are holding houses for capital appreciation, those houses might as well not exist for all practical purposes as far as supply today is concerned.

But at some stage in the future the owners will decide to cash in on the capital appreciation, and will decide to sell. At which stage they go from being essentially non existent, to live supply on the market overnight.

And if these owners, driven by market sentiment, make the decision to sell at similiar time, its possible to move from undersupply to oversupply very quickly. And this is the point I'm making that Skehan's warnings we should be careful we don't find ourselves in a position of huge oversupply are not as mad as they sound.

In trying to estimate future housing demand we count people who don't yet exist - i.e they haven't been born yet or they have not moved to the country yet.

But in trying to estimate future housing supply we don't count houses that already exist.

That seems counterintuitive.