Housing: 'right houses in the right location at the right price'

Despite overall output increasing by 43%, the number of houses available to buy every year has largely stayed the same

As we know from recent reports, Irish house prices are again very much on the rise. According to the CSO, prices increased nationally by 14.4% last year, which is just 4% shy of the peak of the Celtic Tiger housing bubble in 2007. With prices now rising at a speed not seen in almost seven years, housing lecturer at TU Dublin Lorcan Sirr joined the Today With Claire Byrne show on RTÉ Radio 1 to talk about why so few new houses are coming up for sale. (This piece includes excerpts from the conversation which have been edited for length and clarity - you can hear the discussion in full above).

"I started looking at the amount of houses built every year and the type of housing that gets built", says Sirr, "and then seeing who's buying them. We can see that housing output has gone up by nearly 50%, but the vast majority of that housing output has been taken up by social housing, which is built and bought by approved housing bodies and local authorities, and built to rent.

"What you see then is the number of houses for sale. Out of the 21,000 houses that come to the market every year, only about 7,500 of those actually come to the window of your local estate agent. That has been consistent for the last five or six years. It would suggest that builders have decided that this is where the market is at, about 7,500 houses a year. We may have a demographic demand for somewhere between 20 to 50,000 houses a year, depending on who you believe. But the developers have decided that the actual market for people out there with money enough to buy their houses at the prices that they're selling them at is about 7,500 a year."

We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences

From RTÉ Radio 1's Today With Claire Byrne in December 2020, estate agent Marian Finnegan and housing lecturer Dr Lorcan Sirr on rising house prices fuelled by savings

Sirr believes that the "supply, supply, supply mantra" is far too simplistic. "It has to be the right supply in the right location at the right price. Back in the good old days of the great economic unpleasantness in 2006 and '07 and '08, we were building all the right type of houses in the wrong locations. Now we have that flipped around. What we see coming out is not housing that people want to buy, but it's apartments for rent and social housing.

"Now, we can park the social housing because we need social housing, but there's an awful lot of housing coming out there that's not coming to estate agent windows. Despite the overall output increasing by 43%, the number of houses available to buy every year has stayed the same. so that is creating increasing competition for housing because the number of houses isn't increasing, but the demand is increasing."

Stamp duty transactions are further proof of this. "People looking to buy a bigger house because they need it for their family or even to downsize are being squeezed out of the market. Although the number of first time buyers has increased by nearly 6% in the last five years, the number of second time buyers, movers and downsizers, has gone down by a fifth.

From RTÉ Radio 1's Saturday with Katie Hannon, Pat Farrell from Irish Institutional Property on housing supply and bulk-buying by investors

"In Dublin, where the crisis is arguably the greatest, we see the number of first time buyers has gone down in the last five years by a whopping 30% and the second time buyers has gone down by maybe 46%. These people who are looking to buy houses, but the houses aren't there for them. In the capital city, where you'd expect a huge demand for housing, there's less than 2,000 new houses being bought by first time and second time buyers."

The issue, says Sirr, comes back to affordability. "I think a lot of what we do in housing policy is built around the idea of helping people afford what's an offer rather than making what's an offer more affordable. You can see from the flight to commuter land with people who can't afford housing in Dublin, because it's a half a million euro on average. The greatest number of houses and new houses being built and bought is all in the commuter land around Dublin.

"That's contrary to good planning because a lot of those people will buy a diesel car and drive into work and then our emissions targets are out the window, and so on and so forth. I don't think that allowing people to borrow more is the solution because what invariably happens is that prices rise. The interesting thing is going to be this year, if wage inflation goes up, that means house prices are going to go up. If interest rates go up, it'll mean that house prices will go down because it becomes more expensive to borrow money and the bank will let you borrow less. It's going to be an interesting year to see how the prices go, but I suspect they're going to go up."

From RTÉ Radio 1's The Business, living above shops was a normal housing situation for families in the past, but could it be a solution to ease the housing crisis now?

Another issue which Sirr highlights as contributing to affordability and supply problems is planning. "Our planning rules have changed so much that every site that comes up, particularly in an urban area, has a very strong density requirement. You need to get a minimum number of units onto the site and typically that makes development more expensive. It usually means that we can only develop apartments. When house builders are building houses, they can build 10 houses, sell them and fund the next construction of the next 10 houses and so on. That's typically how it happens.

"You can't do that with apartments. You can't build the ground floor, sell it, get the money, then build the first floor. You have to keep hold of the whole and finance the whole development until all six or seven stories are sold. Now, ordinary builders don't have the financial resources to do that, only the large funds with the deep pockets can afford to do that. The small and medium size builder who would normally supply the housing that ordinary people are looking for, has been squeezed out of the market by the planning rules, which is unfortunate and kind of misguided in a way. Ultimately, we're creating bad planning by forcing everybody to look for houses everywhere else."

The views expressed here are those of the author and do not represent or reflect the views of RTÉ

More stories on