A recent market analysis examines Ireland in an international context, comparing it with eight other advanced Western nations across key housing market metrics including population, housing supply, house prices, rents, and affordability.
While countries worldwide are grappling with housing shortages, new data demonstrates the extent to which Ireland stands out in the severity of its housing supply challenge. Examining population growth in comparison to housing delivery between 2015 and 2023, the analysis reveals that 3.8 people were added to the population for every new unit of housing delivered, a ratio of nearly four to one.
This ratio is significantly higher than in other countries analysed. Spain follows with 3.4 new people per one new unit delivered, and Canada with a ratio of 2.9. Ireland’s ratio was 80% worse than that of the United Kingdom (2.1 ratio) and double that of Australia (1.9 ratio). It was also considerably worse than the United States (1.5) and Germany, which had a ratio of less than one person (0.9) for every one new housing unit delivered.
The primary driver of Ireland’s ranking is population growth. At 1.5% per annum, it is the fastest-growing country in the sample, alongside Canada and Australia. While Canada is also struggling to account for its growing population (2.9 population growth per one new household), Australia is faring much better with a ratio of 1.9 of population growth to new housing growth.
Ireland has unique drivers – a delayed natural population boom, high migration due to strong economic growth, and structural legacy issues resulting from the Celtic Tiger crash – that explain why Ireland has the unenviable position of having the worst supply to the population growth of the country analysed. At present, the country is running to stay still, and a more aggressive approach to promoting new housing supply is warranted compared to its peers.
Housing Affordability Declining Despite Rising Incomes
The effect of this population-supply imbalance on housing affordability yields interesting results. Ireland experienced income growth of 27% (second only to the United States) between 2015 and 2022, while residential purchase prices grew by 66%, a differential of just under 40%. This places Ireland in the middle (5th) of the nine countries examined, despite having the worst house building to population growth ratio.
The reason Ireland hasn’t seen a more significant run-up in house price growth can largely be attributed to the Central Bank of Ireland rules introduced in 2015, which placed limits on the amount that people can borrow to purchase a home.
While these measures have protected the stability of the purchase market, the lack of supply has meant that inflation has been funnelled into the rental sector. Ireland has witnessed by far the greatest decline in rental affordability throughout the countries examined, with rents growing by 19% more than income.
Progress has undeniably been made, yet the scale of the housing crisis remains large. The market requires significantly more stock across the country to meet demand for both sale and rental properties nationwide. The speed of development is also crucial – the problem compounds every year when market demand is not met.
The government must be proactive about developing partnerships and working hand in hand with the private sector to advance the quantity and speed of development. The expected revision of current housing targets over the coming months is welcomed. New targets should be reasonable but also ambitious and challenging, which recognise the seriousness of Ireland’s housing crisis as outlined in this analysis.
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