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Irish housing data reveals return of ‘leprechaun economics’

Ireland has managed to get itself a reputation for producing statistics of questionable quality, relevance and accuracy in recent years. In the economic sphere, this view has stemmed from the inflated GDP data in 2015 and the subsequent declaration by the Nobel prize-winning US economist Paul Krugman that the data should be described as “leprechaun economics”.

Unfortunately, the moniker appears to have stuck. The criticisms are highly unfair and without merit on this issue. The Central Statistics Office (CSO) was simply applying agreed international conventions.

However, an area where criticism is justified is in the compilation of house completion statistics. These are not produced by the CSO but they should be.

Housing completions data are the responsibility of the Department of Housing, Planning, Community and Local Government and are calculated by way of connections to the electricity grid. This has always been the case. The economics community has always had concerns about these data but it appears that these issues have only come to public prominence in recent times due to the scale of the housing crisis.

Unrealistic picture

There has been a growing list of evidence to suggest that the electricity connections are providing an unrealistic picture of the level of new supply coming on the market. Most prominently, this week’s census data revealed that the housing stock increased by only 8,800 units in the five-year period to April 2016. Over the same period, there were completions or, more accurately, 51,329 electricity connections. Some of the difference can be explained by homes becoming obsolete but cannot explain the full difference.

In the 12 months to February, there were 4,407 transactions for new homes according the CSO’s analysis of stamp duty returns. This compares to more than 15,000 electricity connections over the same period. Excluding an estimate for self-build (which are not included in the transactions data), it appears the level of transactions over the past year are about half of total completions. It seems implausible that more than 4,000 units have been completed by builders over the past 12 months and now remain idle, yet to be sold.

Double counting

There…

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