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

Now what indeed. It's great to see that the Housing Commission have put a figure on the current deficit:

as of April 2022, the best estimate of Ireland’s housing deficit was between 212,500 and 256,000 homes. For the
remainder of this section, we take the (rounded) mid-point of this range, a deficit of 235,000 dwellings.

The reason they say "as of April 2022" is because that was when the most recent census was taken - so their estimate is based on a precise moment in time, allowing for the fact it may have changed since then, due to movements in population and housing stock.

So they're to calculate the housing deficit in April 2022, a point in time when they had an accurate figure of a) population, b) habitable housing stock and c) average household size.

Obviously from these figures anybody can calculate what the total housing capacity of the country is at that point in time, and use that figure as your starting reference point to calculate deficit, or indeed surplus.

But surprisingly none of the many experts on the housing commission thought to use these three figures to calculate the deficit.

Instead predictably enough they preferred to focus on assumptions based on various long term trends eg population growth, household size, fertility, life expectancy etc.

I suspect the reason is that it is much to harder, if not impossible, to spin the figures we know are accurate into showing a housing shortage of crisis proportions.

Much easier to do that using assumptions. Very difficult to challenge assumptions in the same way as hard figures.

https://www.gov.ie/en/publication/f3551-report-of-the-housing-commission/

Apartment completions were drastically on the rise up 28% from the previous year and making up just over 1/3 of all completions. I agree that as a % apartment completions need to continue to increase and preferably outstrip scheme dwelling and single dwellings combined.

We're in total agreement on this then. But I think in order for apartment building to increase and surpass house building, the developers will need incentives to prioritise apartments. I cannot see the government saying we want more apartments and less houses and this is how we're going to achieve it. Politically that is a difficult policy, no matter the need for it.

However it still doesn't mean that we aren't in a sever deficit of available stock, 200k for arguments sake (low end of the report) and therefore need to drastically increase the supply.

The data we know to be correct does not support the severe deficit thesis. The idea of a current severe deficit of over 200k+ is only supported by assumptions and estimates.

It is intuitively preferable to rely on the correct data we have. Quite why everyone is so reluctant to do so is a mystery.

It is based on census data from last census, April 22. And most accurate information we do have about habitable stock as of that date.

For the purposes of calculating/estimating their 250k deficit they do not take into account the total population nor the total habitable housing stock at April 2022. These are obviously 2 of the 3 most important figures that would influence the calculation of any surplus or deficit.

If I am wrong, by all means correct me and point out the bit that I missed.

It seems like your complaint is that the housing commission are not omniscient and don't have a figure accurate to the unit of how many houses there are in the country suitable to live in.

Quite the opposite. They have this accurate figure. My complaint is simply why do they not use it for the starting point as an illustration of the accurate current surplus or deficit with regard to the known population size, housing stock and average household size.

Do you have any evidence to support your own thesis that we only have a liquidity issue and not a supply shortage?

Yes, plenty. Not least the consistently low turnover rate of the past decade. I've posted this many times on here.

The low turnover rate is a symptom of shortage of supply. In any market ever, shortage of supply impacts liquidity/turnover.

Which came first, the chicken or the egg?

Turnover collapsed in aftermath of 08 and it has never recovered since to anything approaching long term historical norms. Nobody was complaining a crisis shortage of supply when the turnover rate first collapsed. Quite the opposite in fact.

Problem back then was principally people weren't buying as they couldn't sell, problem now is principally people aren't selling because they cannot buy.

Either way that low turnover rate represents almost 15 years of pent up supply as much as it represents pent up demand.

The market has become increasingly clogged up, and it needs to be unclogged. Building an extra 10k houses a year won't do that.

Unlike monetary markets, you cannot just use QE for housing

Oddly enough, proposing the building 250k houses as quickly as possible to solve a liquidity problem is tantamount to an attempt at QE for housing.

Low turnover is a symptom not the cause. 

A symptom of what? If you're really suggesting that a lack of new build stock is the cause of the low turnover rate of existing stock, just stop and think about how absurd that belief is for a second.

A lack of new build stock is literally impossible to be the cause of the low turnover rate, unless you're suggesting that people only sell second hand homes to buy brand new homes. Which is equally absurd.

Liquidity may be a poor choice of phrase, but I mean liquidity of second hand stock rather than finance.

In a functioning market there are ample buyers and sellers. Hence those who wish to sell, whether to move up, down or sideways are happy to place their property on the market for sale, confident that their ample choice of something to replace it with. This keeps the market moving like one giant game of musical chairs.

What's currently happening in the second hand market is more akin to a game of musical chairs in which the music has stopped, and everyone's stuck in their chair.

The swapping of chairs between participants is like the buying and selling of second hand houses to each other on a grand scale - it is the turnover in the market. Long term historical annual average market turnover rate is about 5-6% - i.e somewhere around 5% of the entire existing second hand stock should be expected to change hands in any given year. That's what happens in a liquid market.

It's currently somewhere below 2% and has been for well over a decade. That's what I meant by an illiquid market.

Of course the longer it goes on the worse the problem becomes.

I made post some time ago with a very simple hyper local theoretical property market with only 3 houses to illustrate the point a little better, I'll see if I can find it and repost.

Ok, I agree all of the above, particularly this:

The situation can only be solved with more liquidity (i.e. more supply). Because we have a supply shortage.

But I think where we differ is on the idea the only solution is more new build supply. As you say the problem is all supply.

It sounds like we would agree it is theoretically possible to solve this supply problem by increasing the turnover rate of existing stock of second hand homes if they existed.

Your position is they don't exist because we have a current deficit of 250,000 in the existing stock - that's the problem.

My position is they do exist because there is no deficit in the existing stock, just the cumulative effects of a over decade of low turnover, means the existing stock is very inefficiently allocated - that's the problem.

Is that a fair summation of your position vis a vis mine?