The Irish Housing Market

Part 1 of an ongoing journey

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Housing

Jim Power

Housing is economically very significant, controversial, personal and political. Everybody has a story to tell, too many have an axe to grind. Thankfully, data is plentiful. Unfortunately, a plethora of statistics allows the unscrupulous to cherry-pick and to quote numbers out of context. Sometimes that’s just a mistake. Occasionally it is to suit an agenda.

My contribution to the debate will be summarised on this website and in the podcast The Other Hand. I will always seek to distinguish between the simple statement of facts and opinion. We all have the latter but the substantive contribution I wish to make is to provide regular summaries of the data. Numbers, tables and charts can be dry but they are never unimportant. In the housing debate they are vital - at least for those of us with a vested interest in making the situation better.

This first piece is basically a summary and assessment of the key elements of the Irish residential property market - where it stands now. It provides an update on the key statistics and indicators relating to the market. It is vital to understand where we are before we can contemplate the way forward.

The key indicators include:

. International data

·      Residential property prices.

·      The rental market.

·      The mortgage market.

·      Residential completions

·      Residential commencements.

·      Residential planning permissions.

·      Residential property transactions.

The basic message is that house price inflation is decelerating; the mortgage market is growing; the supply of rental properties is declining; rental levels are still growing very strongly; house building activity was strong in 2022, but some signs of slowing due to a combination of different factors; and the market is still vibrant in terms of transaction levels.

Part 2 will assess the key things that need to be done to try and address what is the greatest economic, social, and political challenge facing Ireland at the moment.

Ireland in an International Context

Cross-border comparisons are of obvious importance for context. Here is the first opinion (in the form of a warning) contained in this piece: beware politicians who claim that the Irish housing crisis is unique to Ireland and has uniquely Irish solutions. Housing is complicated in the extreme - there may well be domestic aspects to the problem that are amenable to domestic policies but it is important to acknowledge complexity and to note that there is a large international dimension to this issue.

Figure 1, Global Indices of House Prices and Rents, 2015=100

Source: OECD

Fact number 1: over the past seven or eight years, Irish house prices have, according to the OECD, increased by around 66%, compared to an OECD average increase of 69%. Internationally, on this measure at least, not much to see here - unless there really is a global problem affecting many OECD countries. A bigger hint about a domestic problem can be seen by eyeballing the rental price index: only 5 other countries in the chart have seen bigger rental increases than has Ireland.

Some longer run OECD data:

Figure 2: Global Comparison of Real House Prices

Source: OECD

Figure 2 also hints at that global dimension - and, additionally, suggests a simple, compelling narrative that Ireland’s house prices lagged the rest of the world during the pre-Celtic Tiger years, went bonkers during those years and now sit slightly above global averages as the Irish economic growth story, relative to the rest of the world, has continued.

What about affordability in an international context?

Figure 3: Global Comparison of House Price/Household disposable Income

Source: OECD

Again, in that global context, a hint that Ireland is not an outlier - in fact, just below European and OECD averages.

What about the relationship between house prices and rents?

Figure 4: Global Comparison of House Prices to Rents

Source: OECD

A similar story emerges. Ireland, on this and other data, is not an outlier. Weren’t the Celtic Tiger years extraordinary? That’s the real outlier.

I should emphasise at this point that in no way am I suggesting that Ireland does not have a big problem with housing. We very obviously do. But many other countries have similar issues. That’s not to suggest any sense of complacency. I simply want to state the facts so that we can understand the true nature of the problem - in particular, its complexity.

IRISH HOUSE PRICES