Perhaps the most notable part of the latest Goodbody report on housing is its conclusion that the stock of unsold properties are firmly on the rise. There have been plenty of reports from the industry of developments not selling out, but Goodbody crunched the numbers and found that in the four quarters to the first three months of this year, there were 2,500 more units built than sold nationwide. Most of this occurred in Dublin, where new supply was 6,905 and purchases were 5,093.

The obvious question is why this is happening, at a time when housing supply is running well below what has been seen as the natural level of demand in the growing economy. The answer focused on by the report, written by Goodbody economist Dermot O’Leary, is not surprising. It is that affordability is hitting demand. Rising prices combined with the Central Bank borrowing rules are simply pricing more and more people out of the market.

Affordable levels

It is obvious looking at average incomes and house prices that prices, in Dublin in particular, are moving above affordable levels for many, even in many instances for dual-income couples. Nonetheless it is still striking that so many are left unsold.

This raises fundamental questions about the cost of building a home in Ireland, a result of the cost of land combined with the productivity and cost base of the construction sector. An interesting aspect of the Goodbody research is its conclusion that only one-third of houses are built by large builders – with the rest built by smaller players, many stretched for funding and operating off higher cost bases.The productivity of the sector and its ability to build efficiently and cheaply must also be in question.

Legacy of bust

A poorly funded and high-cost sector may be yet another hidden legacy of the bust. Notably, only 16 builders here constructed more than 100 homes last year. In a sector where scale can bring efficiency, this is telling. There are clearly shortages, too, in skilled labour and this is another factor pushing up the cost base of the sector.

For the last few years, all the focus has, understandably, been on building more houses, with some increase in supply. But now a wider issue is being raised. Can we continue to build more at prices people can afford to pay?