Nobody in their right mind believes that one-in-five homes in the City are lying empty, writes Geoff Tucker.

Two unrelated articles written by different journalists, both with estimates of the number of new and unsold homes in Dublin, appeared in one Sunday newspaper over the Easter weekend. One suggested that there were 8,000 new apartments and almost completed houses in the greater Dublin region based on estimates prepared by “leading property figures”,

The other quoted a completely ludicrous figure of around 40,000 vacant apartments in the capital, equivalent to over 20% of the housing stock in Dublin City. Nobody in their right mind believes that one-in-five homes in the City are lying empty.

To begin with, the 2006 Census of Population recorded 13,424 vacant apartments in Dublin City (7% of the City’s total housing stock), which completely discredits the estimate of 40,000. And at that, the Census figures are almost certainly a significant overestimate given the inability to accurately measure second-home ownership using a door-to-door inspection and that this figure also includes many local authority homes vacated for rejuvenation and refurbishment.

But what many housing market commentators fail to appreciate is that data on vacancies does not equate to the volume of properties available to buy or rent on the property market. Estate agents involved in the new homes market are best placed to provide a reasonable measure of the true picture of available stock completed and unsold.

Having consulted with a number of other agents involved in the sales of new homes, Hooke & MacDonald estimates that there was in the region of 5,500 new homes completed and available for sale in Dublin City & County at the start of this year. This figure would in fact have been much higher if were not for the high level of pre-sales from plans during 2005 and 2006.

However, it is not just the existing stock level for sale that matters, but the pace at which it is being cleared. The longer it takes, the less need there is to start work on new projects. And this is exactly the approach developers are taking – work commenced on just 7,731 homes (one-third of which were one-off homes) in the three months to January 2008 compared to 14,524 homes (one-off homes accounted for just 21%) in the three months to January 2007.

The focus is firmly on selling the existing stock before commencing work on new developments or phases of existing residential sites.

The figure of 5,500 units would normally be cleared in less than six months. While activity is definitely improving across the market, this is happening at a rather measured pace. On this basis it could take up to nine months to clear the existing stock of completed and unsold homes.

Consequently, new homes starts are likely to remain subdued for most of 2008, before we start to see some pick-up in residential construction activity in the final quarter of the year. Hooke & MacDonald believe that work will commence on just 35,000 new homes this year (35% of which will be one-off homes), which points to supply tightening further next year with just 38,000 new home completions forecast for 2009.

From a buyer’s perspective, there is good choice out there in the market at the moment. But with fewer new homes set to be built both this year and next, at some point we are likely to see the re-emergence of supply-demand gaps in certain locations, particularly in the main urban centres.

Geoff Tucker is Senior Economist with Hooke & MacDonald Estate Agents