High land prices keeps developers from supplying homes that are demanded

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 …

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Finance Minister Announces €1.25 Billion allocated to Social Housing

According to Finance Minister Donohoe, the Land Developmental Agency has identified sites where a potential  3,000 homes could be built. State bodies are working with the government to locate land that can deliver an additional 7,000 units.

Donohoe also pledged an increase allocation of €121 million to the Housing Assistance Payment. This additional €121 million serves as a emergency accommodation. Donohoe reveled a €60 million increase in funding will also go towards emergency accommodations.

Also, landlords will have 100% mortgage relief on loans used to pay for rental properties. This new relief for landlords will be in effect in the next year. This action will help reduce the risk of becoming a landlord.

Homelessness services were also planned to receive an increase of funding of  €30 million. This funding is to help alleviate the burdens of the housing crisis. The total spending on homelessness in 2019 is now boosted to €146 million. Donohoe’s report revealed that housing needs for 25,000 people will be met in 2019 due to the increase in supply of housing stock. The increasing trend in supply of housing has …

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Proportion of buyers with mortgages surpass those who buy in cash in first time since market crash

Recent data reveals that the percentage of home buyers with mortgages have surpassed that of those who buy in cash. This is the first time this has happened since the property bubble and subsequent crash. On July 26th 2016, an Irish Independent/Real Estate Alliance survey reported that 60% of houses are bought with cash, now, roughly a year later, the same survey concluded that less than 30% of homes are purchased by cash buyers.

 

During the years after the housing crash, the high percentages of cash buyers was caused by higher interest rates, stricter restrictions on lending, higher rates of unemployment, and the large amount of speculators purchasing properties as assets after the original home owners have defaulted on their loans. This indicated a general distrust in the market and the squeezing out of mortgage buyers who have defaulted on their homes.

 

Central Bank economist Dermot Coates predicted in 2016 that the proportion of cash buyers was “neither sustainable nor likely to continue into the future”. …

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A response to: Housing for homes – a classic case of market failure

A recent blog post published by Tom Healy, director of the Nevin Economic Research Institute, suggested that the current housing market in Ireland is an example of a failed market. Healy believes that the issue of under supply of housing can only be solved if the government expands provisions of social housing and extends its jurisdictions over prices and supply in the housing market.

Healy based his argument upon the assumption that the current housing market has failed and is unable to recover without intervention. He cites a chronic under supply of housing and the inability of government programs to sufficiently meet demand. While there is indeed a under supply of housing and rising prices due to pent up demand, a series of government construction plans such as the 2013 Forfas Strategy, Capital Investment Plan, and Action Plan for Housing and the Homeless, in addition to private investments are expected to dramatically increase housing supply within the next few years. These projects directly address the supply issue by promising 47,000 additional units of social housing before 2021.

The blog post …

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Danger of a new housing bubble?

While the economy is still in recovery, housing supply has been quickly picking up in the past few years. With government construction plans such as the 2013 Forfas Strategy, Capital Investment Plan, and Action Plan for Housing and the Homeless, the housing boom will likely continue if not further accelerate in the years to come.

There are voices of warning: the Fiscal Advisory Council warns that the trends in output and employment in the construction industry may overheat the overall economy, leading to rapidly raising prices and wages. There are also those who believe that output in the construction industry is recovering slowly and still well below what it should be. DKM Economic Consultants recently published a report lamenting a lack of skilled personnel in construction and advocating for greater government funding and availability of apprenticeships.

Acknowledging that the housing supply response is driven by pent up demand, The Fiscal Advisory Council warns that the speed and scale of the response is the real issue. A dramatic increase …

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Even supply doesn’t fix a supply issue.

Housing is confounding, we are at a frustrating juncture where after a massive property crash brought about in part by a glut of housing we now have the opposite situation of a housing shortage in many areas.

Solutions abound, but no matter what happens this shortage is going to persist due to the time it takes to deliver housing and even if we announced a shovel ready, commencing tomorrow plan for 25,000 houses in cities the shortage would persist for at least another two years.

When you see various commentators saying what will or won’t work it’s almost arbitrary because nothing works in the short term, the main ingredient required to fix this is time.

Housing grants to first time buyers may push up prices, even if they don’t it doesn’t of itself create supply today. Many of the proposals will serve one side of a transaction without affecting price.

If we got rid of VAT would house prices drop? Or would developers merely pocket the additional income because of the fact that a price set during a shortage becomes …

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Irish Times mention Irish Mortgage Brokers in article about renting

We were quoted in a this piece by Aoife Valentine of the Irish Times which was an interesting article about the situation renters face.

When discussing the rising age of first time buyers she quoted us as we mentioned that “this is something that’s become very obvious to mortgage broker Karl Deeter.

“When I started working in lending in around 2003, people in their 20s were borrowing. Nowadays, your typical applicant is no longer 24 to35, they’re 30 to 40,” he says.

New mortgage lending rules issued by the Central Bank in January say that first-time buyers may borrow only 3-and-a-half times their gross annual income, and they must save a 10 per cent deposit on the first €220,000 of the value of the property and a 20 per cent deposit on any higher value.

Deeter believes these rules are now having an effect on who gets on the property ladder.

“What the deposit rules have done is keep people in the rental sector when they otherwise would have been …

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Newstalk: Pat Kenny & Karl Deeter on housing, dereliction and sites

Pat Kenny spoke to Karl Deeter about some of the huge, but unreported issues in the housing market, such as ‘who owns derelict sites and buildings’ and how regulations can sometimes make it difficult to provide quality housing at affordable prices.

This was an extended segment on something of great national importance that generally doesn’t get a lot of airtime so we were very pleased with Newstalk for the opportunity to work through it and to have the time to describe many of the nuances that would otherwise be overlooked.

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Newstalk Lunchtime: Pre-fabs for the homeless?

Jonathan Healy of Newstalk’s ‘Lunchtime’ show spoke to us about the idea of putting homeless people into ‘pre-fab’ buildings. Our general view is that housing the homeless is important, not only economically, but socially as well, if we accept that in civil society we have certain obligations and responsibilities towards each other then it’s a simple answer, house people. But when it comes to how you house them pre-fab’s are not the answer, regular housing is.

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