The report of the review committee on the construction industry, published yesterday, should help to focus attention, not only on the inflationary spiral in house prices, but also on the long term housing needs in the State, especially in Dublin and its hinterland. At present, the construction industry is enjoying an unprecedented boom: house prices may be at record levels but the demand, even for very expensive homes, appears insatiable.
The Minister for the Environment, Mr Howlin, is surely correct in his assertion that very sizeable profits are being made by some builders; the price of materials and labour has been remarkably stable but house prices continue to increase rapidly. The most recent figures indicate that house prices have increased nationally by some 17 per cent in the last year with prices surging ahead by anything between 20 and 30 per cent in the most sought after areas of Dublin.
Since house prices are not included in the Consumer Price Index, the rapid increase in housing costs is not reflected in the overall inflation figures, which remain at very low levels. But, clearly, the current level of house price inflation is unsustainable in the longer term. The Central Bank is rightly concerned that ever increasing house prices will generate a sustained `feel good' factor and create new inflationary pressures in the economy. The British `boom and bust' cycle should serve as a salutary reminder to all in the construction industry.
One of the factors generating the current level of inflation is undoubtedly the shortage of zoned and serviced land in the fashionable areas close to Dublin. Planners need to take a more progressive view of infill residential development schemes on open land in the inner suburbs. There is also, as the Taoiseach, Mr Bruton, said recently, a need to address the issue of housing density to maximise the number of homes which can be provided. Compared to most EU countries, the Republic enjoys low level density which increases the pressure on house prices - and makes it more expensive to provide good public transport and other services. Part of the difficulty is that high rise housing is too readily associated in the public mind with deprivation; but there is no reason why good quality multistorey homes cannot be provided in city areas.
But there is also a need to frame a more coherent planning strategy. The current situation where developers chase after a particular parcel of land and develop it often without reference to any overall development strategy cannot continue. In this context, the recent announcement by Mr Bruton that regional planning guidelines would be prepared for Dublin, Kildare, Meath and Wicklow is very welcome. It is abundantly clear that radical changes are needed in housing and planning policy to provide good living accommodation for a younger generation that is about to enter the housing market. The recent Medium Term Review on the Irish Economy 1997-2003 from the Economic and Social Research Institute (ESRI) estimated that a record 31,000 new dwellings per year will be needed until the year 2001 and a further 27,000 per year between 2001 and 2006. The task facing the new Minister for the Environment is an immense one; he or she will have to manage a very far reaching period of change in housing policy.