Karl Whelan: “…raft of cost-increasing building regs are at least partly responsible”

by Bregs Blog admin team

House-rates-rise

Karl Whelan: “…raft of cost-increasing building regs are at least partly responsible”

In a recent blog post UCD Economist, Karl Whelan, suggests recent costs associated with the the new building regulations S.I.9 are partly responsible for the slump in housing supply. The post “The Central Bank and the Irish Property Market”  dated October 13th 2014, issues associated with the housing market and the Central Bank’s latest steps are discussed. See full post here.

Current price to rent ratios are shown as being cost to levels last seen in the 1990’s:

ltvpic31

Quote: “The Central Bank’s new policies are focused on restricting the downside of house price declines by restricting the provision of mortgage credit.  However, the current trend of rising prices is not in any way related to easy mortgage lending. Indeed, the Central Bank’s own statistics show that the total stock of mortgage credit continues to decline at about the same pace as it has over the past three years (see the red line below)

Rather than being driven by credit, the evidence points to a shortage of supply as the main factor driving house prices.  After the building binge of the Celtic Tiger years, housing completions have slumped. Indeed, given trends in population and household formation, we now appear to be at the point where the previous period of over-building has now been offset by the cumulative under-building of recent years.”

ltvpic4

 

“Nor does it appear that recent price increases are doing much yet to provoke a supply response.  Planning permissions remain at historically low levels. Anecdotal evidence suggests restrictions on the supply of credit to builders as well as a raft of cost-increasing building regulations are at least partly responsible for this lack of supply response” [emphasis by bregs blog]

ltvpic6

His assessment is that conditions in the Irish housing market do not currently point towards the need for a sudden large change in LTV limits, and he wonders if a gradual introduction of higher LTVs is desirable is a more open question.

However, what is required now is more than that: Ireland needs a coherent joined-up housing policy. Ideally, it would be better to debate restrictions on LTVs as part of this broader discussion instead of imposing them for financial stability reasons irrespective of the other parts of the policy framework.

One wonders if the recent credit restrictions proposed by the Central Bank, combined with higher costs due to recent building regulations introduced, will combine to give a new market: lower demand matching lower supply with spiraling rents?

Other posts of interest:

A ‘perfect storm’ for housing? 

The € 500 million + cost of S.I.9 in 2014 | Residential Sector 

SI.9 costs for a typical house

Commencement Notices | 6 months after S.I. 9

Continuing Collapse in Commencement Notices: Building Register – 5th August 2014 

Construction Recovery- watch this space

‘Recovery’ is Still Worse than the 1980s Crisis

Commencement figures- June 25th 2014

CSO: (Q1 2014) planning permissions for dwellings -30% drop

Minister Hogan rejects Irish Times Article

Advertisements