Despite house price drop, the real underlying problem remains

Dublin’s house-price dip may be a glitch in high-end suburbs that affects a tiny minority

Rightly or wrongly, Brexit was named this week as one of the culprits for a fall in house prices in Dublin. The median value of a home in the capital dipped 0.2 per cent to €366,000 in July while nationally it climbed 2.3 per cent to €255,000. Some observers pointed to uncertainty over the UK's possible exit from the EU for a decline in Dublin's high-end neighbourhoods.

Other factors are at play, too, notably Central Bank borrowing rules, which effectively require young people in Dublin searching for their first home to earn more than €94,000 a year and have a €36,000 deposit. All it really tells us is that a lot of things affect house prices, and that homes are only worth what someone is willing, or can afford, to pay at any given time.

None of this is likely to deter listed house builder Cairn Homes, which sold 390 dwellings for an average of €449,000 each during the first six months of the year. The company knows, as does everyone else, that there are not enough homes in the Republic in the places where they are needed – mainly, but not exclusively, in cities, particularly Dublin.

After Cairn published half-year results this week, chief executive Michael Stanley told reporters that while developers were building enough new offices in Dublin to house 60,000-70,000 extra workers, they were only building 1,000 new apartments, enough for 3,000-4,000 people if you "wedge them in", in the city centre, where they are needed. So the supply-demand sums add up.

Dublin’s house-price dip could just be a glitch. Given that the worst-hit areas are “high-end” suburbs, where few can afford to buy, it is a glitch that affects a tiny minority. The real underlying problem remains: demand has well outstripped supply. In most places that is called a shortage. A shortage means that everyone – the industry, Government and that idolised abstraction the “market” – has failed.