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Elevated planning numbers no guide to future housing supply

Cantillon: Latest CSO numbers point to big pick-up in planning permissions last year

Permissions were granted for 12,481 houses in 2016 compared to 10,250 the previous year, which equates to a 22% hike.

Sat Jun 17 2017 - 06:45

Using planning permissions as a guide to future building activity is a mug’s game, never mind what the Department of Housing says.

Perhaps the most reliable research – from the London School of Economics – suggests that up to 40 per cent of planning permissions never translate into homes.

That’s because permissions are often sought just to add value to land; or to alter or extend existing provisions. Equally, many building projects fail for financial reasons before the building phase begins.

If anything, planning permission data is barometer of activity in the land market. The mass sell-off of land here after the crash, combined with generous tax breaks, has seen land speculators flood the market.

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All of which brings us to the latest planning numbers, released by the Central Statistics Office (CSO) on Friday.

They show permissions were granted for 12,481 houses in 2016 compared to 10,250 the previous year, which equates to a 22 per cent hike.

Permissions had fallen from a high of 26,814 houses in 2009 to just over 5,000 in 2012, reflecting the crash in construction. So last year’s figure puts us roughly halfway between the crash and the boom.

Steep rise

The figures show permissions were granted for 3,894 apartment units, compared with 2,794 units in 2015, a rise of nearly 40 per cent.

The number of multidevelopment houses granted permission was 8,251 compared with 6,658 in 2015, an increase of 24 per cent, while one-off houses accounted for a quarter of all new dwelling units granted planning permission in 2016.

Even with these elevated trends, there’s no guarantee we’ll get the same boost in housing output and even if we do, supply will still fall well short of demand, which is now estimated at 40,000 units a year, so great is the clamour for housing in Dublin and other parts.

The Government will point to the fact that residential development takes time to crank up; projects typically involve a one- to two-year time lag between developers’ decisions to build and the output coming on the market.

That said, the latest numbers, while positive, are nothing special.

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