DUBLIN: Ten years after Ireland’s property bubble burst, the economy is recovering from the ravages of a deep recession but a housing crisis remains, due to a supply shortage and spiraling prices.
Sales prices have increased by 47 percent since 2013, when they hit rock bottom, while rents are going up by double digits each year.
“Prices were inflated in 2007, they were too high, but they fell by such an amount that they probably fell by too much,” said Kieran McQuinn, research professor at the Dublin-based Economic and Social Research Institute.
“On the one hand they’re coming back to some long-run level, but equally that long-run level is increasing itself because the underlying economy and demand are so strong.”
As the global financial crisis hit, house prices halved, unemployment soared and Ireland was forced to seek emergency funding from the European Union and International Monetary Fund.
Today, the housing market is a victim of Ireland’s return to economic growth — the shortage is particularly evident in urban areas, which fuel a national average rent of 1,159 euros a month.
Experts predict the increase in prices to continue for another two years as the construction industry, which was hit badly in the crisis, catches up with increased demand.
McQuinn does not expect a new housing bubble, however. Noting that the last one was fuelled by cheap credit and reckless lending, he said: “You don’t quite have that here.
“You’re beginning to see credit flowing into the market… it’s picking up again, but from a very low base.”
Even despite the increase in loans, sales are stagnating in the face of prices that put the cost of a typical Irish three-bedroom house at 500 euros ($600) a week.
“You have middle income earners, between 30,000 and 70,000 euros a year, who are squeezed because they can’t buy but also they can’t qualify for social housing,” said Donal McManus, head of the Irish Council for Social Housing, the national federation of housing associations.
With the current stock of social housing only representing seven to eight percent of the market, he warned that Ireland suffers from a lack of affordable solutions and as a result, an over-reliance on the “unpredictable” private sector.
In an attempt to get things moving, the government has stepped up its interventions in the past 18 months, most recently increasing the budget of the housing ministry by 46 percent in 2018, and promising new developments, particularly of social housing.
“But the government is over-reliant on the private sector which will build the majority of social housing, while local authorities don’t have to buy land and can build cheaper,” said Francis Doherty, a spokesman for the Peter McVerry Trust, an NGO that campaigns against homelessness.
“They choose the most expensive but least effective solution to solve the crisis”, while at the same time homelessness has gone up by 23 percent in a year — a record, he said.
The situation is leading to “overcrowding situations and people still living with their families”, said Fintan McNamara, a spokesman for the Residential Landlords Association of Ireland (RLAI).
McNamara therefore believes the government was wrong to decide “a blanket ban on budget accommodation…just to improve standards”.