High costs of land is making developers unable to supply homes that are truly needed to solve the housing crisis. According to a leading developer, land prices specifically need to be reduced by 25% to 35% to meet Ireland’s real demand for housing.
The development company, O’Flynn Group is currently developing 1,600 new housing units across 11 sites in Dublin and Cork. O’Flynn Group’s chief executive, Michael Flynn stated that Ireland’s residential construction activity may be nearing a plateau. He reasons his statement because of restricting limits of supplying homes, ranging from mortgage lending limits to skill shortages in construction. Regulation serves as another limiting factor in supplying homes.
According to O’Flynn, the real demand for housing is twice the amount developers are able to deliver. He continues to denote that if artificial restrictions are not limited, and demand for affordable housing is not met than the housing crisis will only continue. Lastly, he noted that more households will be forced into the rental sector with out the hope of saving if the trends previously described continue.
O’Flynn was prompted to speak out after economists suggested that Ireland’s top developers may be scaling back plans, even though supply is now close to meeting demand. This viewpoint is supported through a prominent slowdown in growth in property prices, decrease in planning permissions and declining rate of hiring construction workers.
Supply of completed housing units has been shown to drastically increase since 2014, according to recent CSO data. However, estimating future demand can not be easily measured and is subject to opinion and interpretation.
The director of research at Savills, John McCartney noted that residential completions should amount to 22,500 units by the end of 2019. This number is an immense increase from 18,000 units completed in 2018. In 2017, the number of units completed amounted to 14,400. McCartney said that output levels may level out in the next year, which is far below the forecasted demand in housing. The supply of housing has been seen to increase constantly, but in order to meet growing demands, the rate of increase in supply of housing units must also continue to increase.
Builders who plan on increasing their output must seek to increase planning permissions, building workers and sites. However, after the last 5 years of strong expansion, there is now small growth in construction employment across the past 9 months. Furthermore, planning permissions have decrease and the rate of land scales could be diminishing. There is a lack of suitable and available resources to developers to supply affordable housing that resembles real demand.