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How Many Net New Residential Units Are Really Available In Ireland?

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How Many Net New Residential Units Are Really Available In Ireland?

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The CSO announced in June 2018 that they are publishing a new set of data series called New Dwellings Completed. The purpose of this new data is to create realistic statistics on the number of new dwelling completions in Ireland.

Counting the number of new dwellings while important needs to be conducted in a wider context where factors that affect the reduction in the number of dwellings and demographic changes that affect demand for dwellings.

Focussing on the narrow issue of new dwellings may be a distraction on the wider problem of an increasing population and thus a greater demand for residential accommodation and changes that cause a reduction in dwellings.

There was virtually no net increase in the number of dwellings between the 2011 and 2016 census. There was a net increase of just 8,800 new dwellings while the population increased by 348,404.

Based on the assumption that around 85% of the number of planned units become actual units in 15 months, the current stock of planned residential units will translate roughly into just under 25,000 new units by mid-2019. This is a very small increase. This does not take into account any loss of residential housing stock during the same interval.

The CSO announced in June 2018 that they are publishing a new set of data series called New Dwellings Completed. The purpose of this new data is to create realistic statistics on the number of new dwelling completions in Ireland.

Counting the number of new dwellings while important needs to be conducted in a wider context where factors that affect the reduction in the number of dwellings and demographic changes that affect demand for dwellings.

Focussing on the narrow issue of new dwellings may be a distraction on the wider problem of an increasing population and thus a greater demand for residential accommodation and changes that cause a reduction in dwellings.

There was virtually no net increase in the number of dwellings between the 2011 and 2016 census. There was a net increase of just 8,800 new dwellings while the population increased by 348,404.

Based on the assumption that around 85% of the number of planned units become actual units in 15 months, the current stock of planned residential units will translate roughly into just under 25,000 new units by mid-2019. This is a very small increase. This does not take into account any loss of residential housing stock during the same interval.

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How Many Net New Residential Units Are Really Available In Ireland?

  1. 1. How Many Net New Residential Units Are Really Available In Ireland? Notes on Recently Published CSO New Dwellings Completed Numbers and a Wider Review of Demographic Factors Alan McSweeney June 2018 http://ie.linkedin.com/in/alanmcsweeney
  2. 2. How Many Net New Residential Units Are Really Available? Page 2 Contents Introduction.......................................................................................................................................... 3 What Needs To Be Measured? ............................................................................................................... 3 Number Of New Dwellings And Census Data......................................................................................... 9 Summary............................................................................................................................................. 12
  3. 3. How Many Net New Residential Units Are Really Available? Page 3 Introduction The CSO announced in June 20181 that they are publishing a new set of data series called New Dwellings Completed2. The purpose of this new data is to create realistic statistics on the number of new dwelling completions in Ireland. The previous estimates were based on new connections to the electricity network. It was widely acknowledged that this overestimated the number of new residential dwellings being built. It also did not include commercial premises that were converted to residential use. The purpose of this note is to examine this new data in the context of estimating the new number of newly available residential dwellings needed to accommodate demand caused by demographic changes. What Needs To Be Measured? The first issue to be considered is what are the policy questions that need to be (asked and) answered and what information is needed to provide answers? The objective should be to understand the demand for residential accommodation – both purchase and rental in the context of demand. Counting the number of newly built residential dwellings is just one aspect of understanding the state of the residential property stock. A more complete analysis requires taking data from a wider range of sources to create a more informed view of the state of residential property in Ireland. Schematically, the sequence and flow of key sets of measures of property-related activities is: 1https://www.cso.ie/en/releasesandpublications/ep/p-ndc/newdwellingcompletionsq12018/overview/ 2https://www.cso.ie/px/pxeirestat/Database/eirestat/New%20Dwelling%20Completions/New%20Dwelling%20Com pletions_statbank.asp
  4. 4. How Many Net New Residential Units Are Really Available? Page 4 These activities are: 1. Planning Permissions for New Residential Units – planning permissions are granted for new residential units. 2. Commercial Units Converted to Residential Units - planning permissions are granted for the conversion of existing commercial premises to residential use. 3. Unoccupied, Unfinished or Derelict Properties Reinstated to Residential Use Not Needing Planning Permission – previously occupied or derelict or unfinished residential buildings are brought back into use. 4. Planning Permissions Not Proceeded With – some planning permissions will not be proceeded with. 5. Planning Permissions for Student Accommodation – some planning permissions will be for student accommodation and so will not be for general long-term residential use, either owner-occupied or rented 6. Reduction in the Number of Rental Units – the number of residential rental units can be reduced. This specifically refers to changes such as the Housing (Standards for Rented Houses) Regulations 20083 where so-called pre-63 rental units which were exempt from certain planning regulations were brought into the scope. These conditions came into operation on 1 February 2013. This impact of this was the number of rental units that could be accommodated in a property was reduced. 7. Once Off Units Not For Sale – once-off residential units, while adding to the overall residential dwelling stock, are generally, though not exclusively, built by individuals who are moving from existing accommodation. 8. Existing Residential Units Lost – some of the existing residential stock will be lost through fire, dereliction, demolition to, for example, create space for new residential building. 3 S.I. No. 534/2008 http://www.irishstatutebook.ie/eli/2008/si/534/made/en/print
  5. 5. How Many Net New Residential Units Are Really Available? Page 5 9. Rental Units Converted to Residential – this happens when, for example, some rental units (such as those that were classified as pre-63 – see above) would have been sold as the owner did not deem the cost of achieving compliance with the new regulations was worth the investment. 10. New Residential Units Sold To Institutional Investors – newly-constructed residential units will be sold to institutional investors for rental rather than being available for purchase by owner-occupiers. 11. Net New Stock of Residential Units Sold To Owners/ Occupiers – this is the net new residential stock available for sale. The following chart shows the information from a number of sources. However, it is a starting point for a more detailed analysis. The information is shown for the interval 2011Q1 to 2018Q1. The information is only shown at a national level. Some of the data is available for longer intervals and/or at monthly frequencies and at a more granular geographical level. However this represents the local common denominator for all the data. The data show is:  Planning Permissions Units – planning permissions granted for residential units4. This is important because it represents a leading indicator of new residential properties that will be available in the future. The lag between planning permission and the associated properties being constructed and for sale is very variable.  ESB Connections – connections of residential property, either newly built property or previously disconnected (a property is generally de-energised after 6 months of not being occupied) residential reconnected5  New House Guarantee Registrations – These represent registrations HomeBond for warranties on new homes that are meant to cover major structural defects over a ten year period. These registrations are normally issued one month before work commences on the site.  Commencement All Residential Dwellings - A Commencement Notice is notified to a Building Control Authority (a Local Authority) that a person intends to carry out either works. These relate to notices for residential dwellings.6  New Residential Property Purchases – this is information taken from the residential property price register7. There are many issues with the quality of this data. In the context of this analysis, the greatest issue is that sales of large numbers of residential units are recorded as single transactions.  New Dwellings Completed – this is taken from the new CSO data series8 4 BHQ05: Planning Permissions Granted for New Houses and Apartments by Type of Dwelling, Quarter and Statistic https://www.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=BHQ05&PLanguage=0 5 http://www.housing.gov.ie/housing/statistics/house-building-and-private-rented/construction-activity-esb- connections 6 HSM13: Commencement Notices by Local Authority, Residential Units Commenced and Month https://www.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=HSM13&PLanguage=0 7 https://www.propertypriceregister.ie/website/npsra/pprweb.nsf/page/ppr-home-en 8 NDQ01: New Dwelling Completions by Type of House and Quarter https://www.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=NDQ01&PLanguage=0
  6. 6. How Many Net New Residential Units Are Really Available? Page 6 The data in the chart is: Quarter Planning Permissions Units ESB Connections New House Guarantee Registrations Commencement All Residential Dwellings New Residential Property Purchases New Dwellings Completed 2011Q1 3,667 2,766 274 1,402 752 1,875 2011Q2 3,310 2,561 168 1,235 751 1,791 2011Q3 2,512 2,590 183 1,014 684 1,687 2011Q4 2,156 2,563 209 714 762 1,641 2012Q1 1,355 1,931 144 806 553 1,131 2012Q2 1,406 1,998 195 1,317 623 1,117 2012Q3 1,638 2,107 125 960 754 1,205 2012Q4 1,851 2,452 163 959 1,234 1,458 2013Q1 2,308 1,691 219 965 632 889 2013Q2 1,926 2,009 408 1,085 669 1,146 2013Q3 1,409 1,982 417 1,386 897 1,033 2013Q4 1,556 2,619 282 1,272 1,544 1,507 2014Q1 1,604 2,090 489 5,247 852 1,094
  7. 7. How Many Net New Residential Units Are Really Available? Page 7 Quarter Planning Permissions Units ESB Connections New House Guarantee Registrations Commencement All Residential Dwellings New Residential Property Purchases New Dwellings Completed 2014Q2 1,606 2,742 511 379 1,237 1,318 2014Q3 2,144 2,957 679 923 1,284 1,404 2014Q4 2,057 3,227 895 1,064 2,028 1,702 2015Q1 3,213 2,629 789 1,337 1,161 1,371 2015Q2 3,110 2,996 1,157 2,354 1,935 1,570 2015Q3 2,704 3,289 1,492 2,654 1,416 2,033 2015Q4 4,017 3,752 859 2,402 1,705 2,245 2016Q1 3,091 3,144 1,263 2,902 1,054 1,968 2016Q2 3,141 3,498 1,291 3,323 1,613 2,395 2016Q3 5,814 3,865 1,451 3,015 1,759 2,511 2016Q4 4,329 4,425 1,621 3,994 2,381 3,041 2017Q1 4,650 3,896 2,210 3,860 1,623 2,779 2017Q2 4,453 4,640 2,999 5,408 2,126 3,298 2017Q3 4,739 4,997 2,435 4,061 2,351 3,785 2017Q4 6,934 5,738 1,822 4,243 3,174 4,584 2018Q1 8,405 3,158 2,013 4,374 2,025 3,526 There is a data issue with commencement notices for 2014Q1. There was a switch between an old and a new method of recording at that time. All the series show the same trend over the relatively short interval. At no time during the interval does the number of units for which planning permission was granted come close to the number of Data is available for two types of commencement notice: single dwelling (once-off development) and multiple dwellings (multiple unit development). The following shows the data for the number of units where the commencement notices were for multiple dwellings and the number of new dwellings recorded in the new time series at a lag of two quarters. The number of new dwellings recorded in the new data series closely matches the number of commencement notices at a lag of two quarters apart from the values for the quarter 2014Q1. So the number of new dwellings completed is around 89% of the number of commencements 6 months later.
  8. 8. How Many Net New Residential Units Are Really Available? Page 8 The following chart shows the number of dwelling commencements three quarters after the number of dwelling planning permissions. So about 95% of number of units for which planning permission has been granted start being constructed 9 months later.
  9. 9. How Many Net New Residential Units Are Really Available? Page 9 Combing the two sets of data gives a very rough estimate or around 85% of the number of dwellings for which planning permissions are granted translate into new completed dwellings at a lag of 15 months. Number Of New Dwellings And Census Data The context for information on the number of new dwellings is the demand for residential accommodation. This is driven by demographic factors: size of the population and sizes of different cohorts. The following chart shows the estimated annual population9 and the size of the housing stock10 for the years 1996 to 2017. The housing stock numbers are only available for the census years. 9 Taken from PEA11: Population estimates from 1926 by Single Year of Age, Sex and Year https://www.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=PEA11&PLanguage=0 10 Taken from E1071: Housing Stock and Vacancy Rate 1991 to 2016 by County and City, CensusYear and Statistic https://www.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=E1071&PLanguage=0
  10. 10. How Many Net New Residential Units Are Really Available? Page 10 The following table contains the population11 and number of dwellings data and shows the differences between the years. Year Estimated Population Census Population Census Number of Dwellings Census Population Difference Census Number of Dwellings Difference 1991 3,525,719 3,525,719 1,160,249 1996 3,626,087 3,626,087 1,258,948 100,368 98,699 1997 3,664,313 1998 3,703,082 1999 3,741,647 2000 3,789,536 2001 3,847,198 2002 3,917,203 3,917,203 1,460,053 291,116 201,105 2003 3,979,853 2004 4,045,188 2005 4,133,839 2006 4,232,929 4,239,848 1,769,613 322,645 309,560 2007 4,375,842 2008 4,485,070 2009 4,533,395 2010 4,554,763 2011 4,574,888 4,588,252 1,994,845 348,404 225,232 2012 4,593,697 2013 4,614,669 2014 4,645,440 11 The population census data is taken from EY001: Population at Each Census from 1841 to 2016 by County, Sex and CensusYear https://www.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=EY001&PLanguage=0
  11. 11. How Many Net New Residential Units Are Really Available? Page 11 Year Estimated Population Census Population Census Number of Dwellings Census Population Difference Census Number of Dwellings Difference 2015 4,687,787 2016 4,739,597 4,761,865 2,003,645 173,613 8,800 2017 4,792,490 The only overlapping interval in the population data, census housing stock data and information on numbers of new dwellings in from 2011Q1 to 2016Q1. Note that the annual population estimates and the census population numbers because the measure population at different times of the year, The following table shows the number of new dwellings12, both newly constructed and unfinished dwellings (ghost estates) that were completed. Quarter New Dwellings Completed Unfinished Total New Dwellings 2011Q1 1,875 383 2,258 2011Q2 1,791 331 2,122 2011Q3 1,687 326 2,013 2011Q4 1,641 338 1,979 2012Q1 1,131 278 1,409 2012Q2 1,117 357 1,474 2012Q3 1,205 431 1,636 2012Q4 1,458 385 1,843 2013Q1 889 354 1,243 2013Q2 1,146 323 1,469 2013Q3 1,033 393 1,426 2013Q4 1,507 436 1,943 2014Q1 1,094 422 1,516 2014Q2 1,318 627 1,945 2014Q3 1,404 716 2,120 2014Q4 1,702 603 2,305 2015Q1 1,371 342 1,713 2015Q2 1,570 453 2,023 2015Q3 2,033 384 2,417 2015Q4 2,245 492 2,737 2016Q1 1,968 409 2,377 Total 31,185 8,783 39,968 So the number of new dwellings between the 2011 and 2016 census was 39,968 but the difference in the housing stock recorded at these two censuses was just 8,800. So, assuming these sets of data are correct, the number of new dwellings was offset by a reduction of 31,168 dwellings elsewhere. 12 The data is taken from NDQ04: ESB Connections by Type of Connection and Quarter https://www.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=NDQ04&PLanguage=0
  12. 12. How Many Net New Residential Units Are Really Available? Page 12 One likely cause of this reduction was the introduction of the pre-63 regulations referred to on page 4. There will be other factors that will cause a reduction in housing stock. However, other census recorded large increases in housing stock. The pre-63 regulation intervention represented a pro-cyclical regulatory change whose impact was not evaluated before it was implemented. Based on the assumption that around 85% of the number of planned units become actual units in 15 months (see page 9), the current stock of planned residential units will translate roughly into just under 25,000 new units by mid-2019. This is a very small increase. This does not take into account any loss of residential housing stock during the same interval. Summary Counting the number of new dwellings while important needs to be conducted in a wider context where factors that affect the reduction in the number of dwellings and demographic changes that affect demand for dwellings. Focussing on the narrow issue of new dwellings may be a distraction on the wider problem of an increasing population and thus a greater demand for residential accommodation and changes that cause a reduction in dwellings. There was virtually no net increase in the number of dwellings between the 2011 and 2016 census. There was a net increase of just 8,800 new dwellings while the population increased by 348,404.

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