A Hallowe’en post on the problem of “ghost estates” (not oversupply)

Last week, the Department of the Environment (DoE) released a comprehensive report into the state of the country’s ghost estates. Below is some analysis of what was in the report and which areas are worst affected. But I think it’s important, given the heated discussion that broke out on irisheconomy.ie, to spell out at the start what this report is and what it isn’t.

The DOE figures are not a measure of vacant houses in Ireland, nor are they a measure of oversupply of houses in Ireland. For example, according to Rob Kitchin and Justin Gleeson on Ireland After NAMA, the latest figures from DoE do not contradict the DoE/DKM estimates that there are up to 250,000 vacant properties, excluding holidays homes, in the country. But even vacant properties is not really what we’re normally interested in. What we’re normally interested in is oversupply, i.e. the number of vacant properties above and beyond what is normal in a property market. DKM/DoE estimated this at about 135,000 (+/- 12,000) last year.

The 33,000 properties in the DoE report that are either complete-and-vacant or nearly complete would represent, then, about 25% of all oversupply in the country. Before we discuss these in more detail, where does the rest of the oversupply come from? To understand that, we must understand the terms of reference of the DoE report.

Three criteria, in particular, are relevant. The first is that it only includes developments, i.e. there had to be two or more properties on site. A one-off property built on a site and lying unoccupied would not be included. The second is that it includes housing estates started on or after April 2007. Adamstown, for example, started in 2006, would be excluded. The last is that the vacancy rate had to be above 10%, i.e. this really is just looking at ghost estates, not just unsold properties.

Why would the focus be just on estates where the vacancy rate is above 10%? Conspiracy theorists will point to a whitewash, asserting confidently that the whole thing was rigged to give a lower total number of empty properties than previous estimates. The answer, in my opinion, is a lot simpler. The DoE was interested in the problem of ghost estates, in this instance, not the problem of oversupply.

Like negative equity, the cost of living in a “ghost estate” increases a way that an economist would describe as “non-linear”. Someone living in €75,000 negative equity is much more than 10 times worse off than someone living in negative equity of €7,500. By this, I mean someone in €7,500 negative equity is much more than 10 times as likely to find a way out – e.g. a gift from family, a credit union loan – than someone in €75,000 negative equity, who is effectively trapped.

So too with ghost estates. If you live in an estate of 100 homes where 10 are empty, you are more than likely unhappy about it. It pushes down the price. However, your chances of “escaping” – if that’s what you need to do – are much better than someone who lives in an estate of 100 homes where 50 are built and empty. Not only are you incredibly unlikely to be able to sell – at that young age, untouched homes enjoy a premium over second-hand ones – but also there are the externalities of living in a ghost estate, everything from fewer children for your own to play with to no public transport links because densities are too small. Sense of community and security will be present in an estate that’s 90% full but may not in an estate that’s only 50% full.

In time, it will be interesting to see how much these negative pressures take their toll on ghost estates, above and beyond other properties. All we can do now, though, is see where has been worst hit and tailor the State’s reponse to those areas in particular. Over on ManyEyes, I’ve put up a dataset with county-level information on a number of metrics, including the number of ghost estates, the average number of homes in each ghost estate and – as a crude measure of sustainability – the proportion of all ghost estate properties in a county that is in apartments. (Clearly, this won’t be fair to Dublin.) There are a dozen county-level metrics in total, and the visualisation you can play with is here. The graph below shows two statistics: on the left, the total overhang of vacant properties in percentage terms (darker=worse), while the one on theh right shows the percentage with fully functioning roads (darker=better).

A number of facts emerge from looking at the data geographically. The shape of new-build Ireland -stretching from Dublin down to Cork – is obvious from the “size of ghost estate” map. Outside the Dublin area, the Mid-West – Laois, Westmeath and Offaly – has the largest ghost estates on average: there are 200 of them in total, each of which contains an average of 90 homes. While there are over 200 ghost estates in Donegal and Leitrim alone, the average size is only 25 in those counties. Westmeath has another issue: one third of its ghost estate properties are apartments, compared to just just over 10% in Leitrim (and indeed Laois).

Another important statistic is how many of these ghost estate properties are occupied. This is the county-level ghost-estate figure for the hypothetical estate above of 100 homes. In the Kildare, Limerick and Kilkenny ghost estates, about 75 homes out of the 100 are occupied. In Donegal and Leitrim, though, only 50 homes in 100 are occupied. In most places around the country, two thirds of ghost estates are occupied.

The other statistics over on Manyeyes give the percentage overhang in ghost estates, by property type (detached, apartment, etc.) relative to the total number of occupied properties in the county, which is based off Census 2006 and these ghost estate figures. Some of the figures are huge, for example in Leitrim, there is 1 vacant terraced house for every 4 occupied terraced homes.

Overall, the report confirms that there is a significant issue with newly built property lying empty in ghost estates. Across the country, for every 100 properties that are occupied, seven are in ghost estates and there are further two sitting empty in ghost estates (and another four empty elsewhere in the country). For apartments, the problem is much worse: for every 100 apartments occupied in the country, 30 are sitting empty.

However, there is good news in there too. First off, of the 8,500 vacant apartments, 5,600 are in county Dublin. So there is an issue but it is not insurmountable: this represents about 7% of the total stock of apartments in the county. Secondly, in eighteen other counties, the overhang is about 2% or less. It is only in certain parts of the country – especially Cavan, Leitrim, Sligo, Roscommon, Longford – that a serious problem exists. It is there where questions about the planning process must be harshest and where Ireland’s ghost estate strategy must be at its most creative.