The Volume Of Housing For Sale Hits A Record Low, But Policymakers Could Create Impactful Change
The number of second-hand homes available to buy in Ireland is at the lowest point since 2006. On top of that, price inflation is now acute in Dublin as well as across the rest of the country.
These are the key findings of Daft.ie's Irish House Price Report Q3 2024. The property listings website has been tracking Ireland’s for-sale and rental markets since 2004 and the situation has rarely looked more challenging, according to Daft.ie Economist Ronan Lyons, who is also associate professor of economics at Trinity College Dublin.
“When I ask people setting up in Dublin how they found the search for somewhere to live, invariably they use the word ‘luck,’” he said. “It probably isn’t luck, it’s probably a combination of foresight, planning and budgeting because there’s no doubt it’s an extremely tough market. There are no silver bullets, but we need policymakers to make changes for the long term.”
Ireland’s housing crisis has been deepening since the financial crisis in 2008 which halted much construction. A Housing Commission report published in May 2024 reported that, based on the 2022 census, there is a deficit of between 212,500 and 256,000 homes in Ireland.
Recent economic shifts have further stymied liquidity in the housing sales market, Lyons said.
“Interest rates have increased, which means that many people have fixed their mortgage rate,” he said. “This effectively knocks back secondhand supply — once people have fixed their rate, they’re less likely to sell their home, which lowers the volume of properties coming onto the market.”
With fewer properties available to buy, price inflation has increased. As well as looking at price increases, Daft.ie tracks the average gap between a property’s listing price and the actual price achieved. At the moment, homes are selling for on average a record 7.5% higher than the listing price in Dublin and 5% higher across the country as a whole.
“Even Dublin is seeing price inflation, which has been less the case for the last few years,” Lyons said. “Post-Covid, big cities hadn’t experienced such high inflation as other areas due to remote working and people’s desire to get away from expensive markets. Now, this has reversed.”
The lack of supply of new homes, both for sale and to rent, can be attributed to two factors, Lyons said. First is the lack of clarity in Ireland’s zoning and planning system. Zoning dictates whether or not land can be used for residential development, but even if permitted, more terms and conditions can apply than are immediately apparent.
“A number of developments have been struck off due to technical difficulties and rather than local authorities providing an opportunity to rectify them, they instead declare the application invalid and three years of preparation go down the drain,” Lyons said. “Even if the local authority says yes, the local community might take the scheme to court to stop it.”
Bringing greater certainty to the zoning and planning process is one solution to the lack of supply, Lyons said. Rather than focusing on ways to ease the housing market immediately, policymakers need to take a longer-term approach with real structural change.
An option could be to create master plans for cities that lay out a plan for the next few decades, as is the case in some European cities, he said. This would reduce uncertainty for everyone considering a scheme.
A second cause for the lack of new home supply is the high cost of construction, which reduces viability. Since the financial crash, Ireland has been an expensive place to build compared to other countries, Lyons said. Much of the construction that has taken place has focused on Dublin, as that is the only place where a developer can meet their costs.
“Developers need to understand why the cost of construction is so high in Ireland and try to reduce it line by line,” Lyons said. “Ireland is relatively cheap for hard materials like concrete, but wage rate is high relative to productivity. Reducing wages is obviously unpopular, so policymakers need to focus on improving productivity.”
Overall, the government needs to take a different approach to housing, Lyons said. The emphasis has been on creating homeowners. Rental housing, which was supported for a while, is out of favour. Coliving schemes, for example, were once approved, but in 2020 their construction was banned due to the feared impact on the rental market.
“None of the political parties are putting any emphasis on creating new rental accommodation, which is where a lot of the acute pressure is,” Lyons said. “I'd love to see that reinstated as a policy priority. In principle, the market could start improving relatively quickly, but in reality, that’s a long time away.”
However, the fact that Dublin has seen less rental inflation than the rest of Ireland over the last two years as some purpose-built rental accommodation has completed should be seen as a positive, Lyons said. It is evident that creating rental accommodation serves to ease the market, he added.
A positive message to take away from Daft.ie’s Irish House Price Report Q3 2024 and previous iterations of the report is that people are flexible, Lyons said.
“After the pandemic, those looking to buy were quick to respond to the opportunities presented by remote working,” he said. “This created pressure in rural areas that hadn’t seen much inflation, but also means that affordable housing works. If we can build homes that meet enough people’s incomes, they will be flexible and respond.”
This article was produced in collaboration between Daft.ie and Studio B. Bisnow news staff was not involved in the production of this content.
Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.
