Surge in numbers buying second property - report

Close to a third of all residential property built in the last six years are being used as second homes by their owners, according to a report by Davy Stockbrokers.

The study of Ireland's housing market indicates that the Celtic Tiger has seen a surge in the numbers of people buying a second property for occasional use, according to author Mr Colm McCarthy.

The figures do not take account of property bought as an investment.

The study's authors say the figures debunk the notion that demographics have been the main driver of the housing boom of the past decade.

Mr McCarthy, along with economists Ms Annette Hughes and Ms Ernestine Woelger, also warn that the risk of a fall in property prices has risen while the prospects of further rapid increases in values decline.

Demand for new homes in the next few years will be adversely affected by either rising interest rates or increasing unemployment and falling consumer confidence, they argue

This is likely to reverse the recent trend where affordability has improved, as rising incomes and falling interest rates cancelled out the impact of rapidly rising prices.

The study's authors repeat the finding of several recent reports that the rate of housebuilding in the Republic is unsustainable. Housing completions have been running at an "exceptionally high rate" in recent years, the report states, with more that half a million new homes built between 1990 and 2003.

This year alone, 67,000 completions are expected. However, less than half of these will be taken up be newly-formed households, with the balance comprising vacant properties, the replacement of older buildings and second homes.

While the authors accept that household size has fallen and the population has grown in the past decade, fuelling demand for new homes, they argue that housebuilding has increased "at a much more rapid pace than household formation".

The gap between the number of homes built and the number needed for new households has been widest in the Border counties, where more than half the properties built are used for other purposes. Leitrim tops the table with 72 per cent of the houses built not required by new households.

Mr McCarthy said the data available from the Department of the Environment and Local Government was inconclusive but indicated that there had been a significant trend to buying holiday homes outside Dublin.

This reflected findings in the recent ESRI mid-term review, he said.

He also noted that there was a substantial demand from people living outside Dublin for apartments in the capital for occasional use.

He called for changes in the way housing data is collected to provide better information for policy planners.