Published: Wednesday, 27th January, 2010 5:00pm

Housing oversupply to impact on prices for 'some time to come'

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The fall in prices in the Irish property market is likely to continue for some time yet, especially in rural areas like Co. Cavan because of the large oversupply of housing, according to new figures published by the National Institute for Regional and Spatial Analysis (NIRSA), which is based at NUI Maynooth, writes Raymond Denning.

The housing boom in Ireland, which was fuelled by increasing prices (and vice versa), has created a vast amount of housing, which will probably never be occupied, as it now appears development was out of kilter with projected demand. Using figures from the Department of Environment, Local Government and Heritage and the 2006 Census, NIRSA calculated a projected demand for housing from 2006-09, using population trends from 1996-2006.

This showed a projected demand for housing in county Cavan of 1,541 units but between April 2006 and December 2009 5,506 units were built giving an oversupply of 3,964, or 257.2% oversupply for that period.

While these figures are not the worst in the state, urban and commuter belt areas (such as Virginia, Ballyjamesduff and Kingscourt) will be better able to absorb the oversupply within a much shorter period, when demand begins to grow again, and also some properties may be used for social housing.

The national figures given show that 217,101 units were built between 2006-09, which a projected demand for that time of only 85,446 units, leaving an oversupply of 131,685 nationally, but with a large variation from county to county.

According to Professor Rob Kitchin, who compiled and analysed the data, the problem of oversupply "has been exacerbated by a softening market and changing demographic profile as immigration has fallen", meaning the oversupply figures may well be higher given lower demand in recent times.

The housing oversupply means that many houses are vacant and unlikely to be occupied, especially in rural counties, keeping prices low.

"This likely to keep prices depressed in such areas for some time to come and poses questions about what to do with housing that remains vacant in these areas for long periods", added Prof. Kitchin.

Meanwhile, the Permanent TSB/ESRI price index shows that house prices fell nationally by 18.9% in 2009, compared to just 9.1% in 2008, showing a quickening in the decline.

Prices fell by 3.1% and 3.6% in November and December 2009 alone.

And this trend seems set to continue according to property website MyHome.ie, which has forecast a further 10% fall in asking prices for residential property in 2010. It's not over yet...

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