The recent housing boom is now tapering off, house-building having peaked at an annual rate of about 90,000 dwellings. This, in relation to our population, was a dwelling-construction rate three times higher than the average for the rest of Europe, writes Garret FitzGerald.
While our housing boom is a fairly recent phenomenon, our housing stock had been rising steadily since our population began to increase in the early 1960s.
Since then, the number of occupied dwellings has more than doubled, rising more than twice as fast as our population.
This has reflected a steady decline in the size of the average household, which on average now comprises only 2.8 persons.
We are now a very well-housed people, occupying on average two rooms each, which is over twice the space the average Irish person enjoyed 50 years ago.
Moreover, half of our housing is modern, built within the past 25 years. This must be unique in Europe.
Until the publication in March of the first volume of the 2006 census the only information available to us about housing related to occupied houses. No data was compiled about empty houses.
However, in last year's census details of all houses were recorded, empty and occupied. And it was discovered that, in addition to 1,500,000 occupied houses, there were almost 300,000 empty dwellings, well beyond the number that had been thought to exist.
A small proportion (one in 60) of this total of almost 1.8 million dwellings were only temporarily vacant, all the normal occupants being away at the time of the census. And a further 50,000 were holiday homes, empty at census time. Of these second homes, 70 per cent were in the west and just under 20 per cent in the south-east.
In Dublin, the dwelling vacancy rate is less than 10 per cent. But when holiday homes are included it rises in western counties to 24 per cent - and to just 15 per cent in the rest of the country. This adds up to a total of 215,000 empty dwellings, in addition to the 50,000 vacant second homes.
By any standards we now have a large housing surplus. However, this runs in parallel with a notable shortage of social housing, which has led to long housing waiting lists for less-well-off people who need local authority, or otherwise affordable, housing.
The scale of this social housing shortfall reflects a shift in public housing policy that took place in the late 1980s.
At the height of our economic difficulties in the mid-1980s our local authorities were still being given by the government sufficient resources to build up to 7,000 houses a year for those who could not afford to house themselves. However, since we have become one of the highest-income countries in Europe, our local authorities have been provided with less resources for public housing.
As a result, even allowing for new forms of social housing, the total number of dwellings being made available annually to less-well-off people is currently down to 5,500, one-fifth less than was the case at a time when we were a poor country with incomes per head 40 per cent lower than in the rest of the EU.
Only 7 per cent of all dwellings are currently available for rent by local authorities to the less-well-off, barely half the proportion of such dwellings in 1981.
Our owner-occupancy rate is now one of the highest in the world. Almost 77 per cent of all lived-in dwellings are owner-occupied, almost half of these being free of any mortgage, and we can assume that almost all of the 265,000 unoccupied dwellings are also owned rather than rented.
This compares with the situation in countries like Germany, where over half of the population lives in rented dwellings.
This reflects our history. The late 19th century land reform created 300,000 owners of farms, all deeply attached to their newly-acquired property. Then, throughout the 20th century we moved from being a predominantly rural society to becoming a predominantly urban one. In parallel with this process the property-owning values of our rural population spread to the rapidly-growing urban areas, leading to our present very high ratio of owner-occupancy.
In relation to housing, we are at something of a turning point. The boom in this sector is over for the moment, and the action that the Government is now taking in relation to stamp duty on first-time house purchases may be too late, and too limited, to have a significant immediate impact on the housing market.
Although the impact of higher interest rates on house prices has been established by economists to be less drastic than is popularly believed, nevertheless the doubling of the euro interest rate during the past 12 months, together with the prospect of further rate increases, has already had a significant impact on our housing market.
It is widely believed that house prices will fall this year by 10 to 15 per cent and that new-dwelling construction, which currently employs 150,000 workers, will decline substantially.
While much of the impact of this adjustment will be delayed until next year, employment in house-building, especially in the Dublin region, is likely to drop significantly from September onwards.
Some of the workers thus unemployed may find work in the still-expanding public infrastructure sector. However, even allowing for the likely return to their home states of many of the 26,000 foreign-nationals employed in construction, the level of unemployment is likely to rise, especially as certain skills required in house-building have limited scope in other sectors of construction.
Last September in this column, foreseeing the emergence of this downturn, I suggested that its adverse impact on employment in private-sector house-building could be mitigated if the Government were to be ready at this point with plans for increased local authority and social housing provision.
As stocks of unsold private dwellings start to accumulate the Government will have a unique opportunity to purchase at favourable prices an increased number of dwellings for social housing purposes, as well as mitigating unemployment by expanding local authority construction.
The reality is, of course, that our housing market has come to need a correction that will adjust prices downwards to a more sustainable level - and the least bad moment for such a correction is a time like the present when favourable external conditions, especially in European markets, are currently providing new growth prospects for the sluggish manufacturing sector of our economy.
The housing downturn is bound to have a short-term negative impact on our economy, but that will be more limited in time and scale because it is coinciding with a period of growth in external markets.