As ‘Housing for All’ Falters, Might Rebuilding Ireland Finally be a Real Possibility?

Ireland’s property market is regularly described as dysfunctional or broken, with so many separate and nuanced challenges that political careers have been built upon debating them. At the core, all arguments circle back to issues of supply, demand, and the overall mismatch of these two economic forces. And delivery costs versus affordability appears to be the biggest stumbling block in really getting to grips with this mismatch.

So it was somewhat of a surprise this week to read that the European Commission has determined Ireland’s property prices are, in fact, undervalued. And the extent of the undervaluation is significant – as high as 17 percent. This puts Ireland alongside Lithuania and Romania, which are not traditionally seen as hotbeds of real estate investment activity. Interestingly, Ireland is one of the few EU countries not to have reached and/or surpassed its pre-2008 levels. An extension of the Commission’s finding is that there would appear to be scope for continuing house price increases. 

By way of comparison, the same research found that homes in half of the countries within the EU are overvalued. 

This assessment comes despite house prices in Ireland having risen at the second-fastest rate in the EU since 2013 (85 percent), second only to the increases seen in Hungary (118 percent). The report acknowledges “sharp growth” in Irish house prices, and this growth has been attributed to “sustained demand backed by economic growth, historically high household savings and low interest rates”.

Across the country, the supply of new homes has been impacted by pandemic restrictions on construction activity since early Q2 2020, yet demand did not diminish as expected over the same period. The “historically high household savings” is certainly a factor that has played a part in 2021 and this looks set to continue, despite other/contradictory signals of a slowdown.  Can both of these opposing outlooks be true?
“…but the data also points to differences at a “macro” and “micro” level. At a macro level, the fundamentals may point to “cheap” Irish property, but at an individual, or micro level, affordability is biting hard… Though a house price correction triggered by a rise in interest rates cannot be ruled out, the price adjustments are likely to be muted in view of the strong fundamentals behind demand and existing supply side restrictions to the housing stock”
Ironically, within months of the Government’s ‘Rebuilding Ireland’ plan being scrapped in favour of ‘Housing for All’, housing for (almost) all is getting further out of reach and will only be addressed through a homebuilding industry that is supported in rebuilding all of Ireland, not just the urban centres. A democratisation of investment and development opportunities across rural Ireland seems likely at this stage, inevitable even.

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group