House price inflation Q&A
With the ERSI predicting a 20% hike in home prices, how is the Government positioned?
The report by the ESRI shows that property prices in Ireland have risen by 450 per cent since 1995, more than in any other European country. Photograph: Rui Vieira/PA
Q: House prices could rise by 20 per cent in the next three years. Is there a bubble?
A: To paraphrase Bertie Ahern’s unfortunate term about the boom getting boomier, not quite. The report by the ESRI shows that property prices in Ireland have risen by 450 per cent since 1995, more than in any other European country. However, it also shows a significant fall during the economic crash. There has been a commensurate rise since 2013 that has brought us back a lot of the way to 2007 levels. But unlike 2007, when prices were running way ahead of what could be afforded, the report says that house prices are still aligned with economic fundamentals. The projected 20 per cent increase to 2020 is predicated on continued economic growth being matched with no substantial freeing-up of housing supply. But comparing Irish house prices with those in other countries leads to the surprising conclusion that “Irish prices appear to be quite affordable”.
Q: So the fears of voters will be appeased?
A: Probably not. The figures will give cold comfort to people trying to get on the property ladder for the first time. There is still a yawning gap in supply of affordable starter homes and it is compounded by rents rising by more than 11 per cent over the past year, even after the introduction of rent pressure zones.
Q: What is the Government’s response to all this?
A: Well there is Rebuilding Ireland, the ambitious plan announced by former minister for housing Simon Coveney only a year ago. With a budget of more than €5 billion, it promised to comprehensively address homeless, increase the supply of social housing by 47,000 units by 2021, and increase yearly house builds or output to 25,000 per year by 2021. But a few of its early targets were missed. The most embarrassing was the promise to take all homeless families out of unsuitable hotel and B&B accommodation. That was promised by July but did not happen. Indeed the number of homeless parents and children in such emergency accommodation increased during the autumn.
Q: What was the new Minister’s response?
A: Eoghan Murphy took over the helm in housing in June and soon afterwards announced a review of Rebuilding Ireland. Rather than a big announcement, Murphy has announced a number of specific initiatives, based on reviews on aspects on the plan. The Minister predicted 3,000 people would leave emergency accommodation as a result of measures announced in the budget. There has been a promise of almost 8,000 new social units next year between direct builds by the State, properties made available by developers, leasing and refurbishing.
Q: How is the Government explaining it?
A: On Saturday, Taoiseach Leo Varadkar said that Ireland’s homelessness statistics compared favourably to many EU countries. Some homeless agencies and parties said he was not comparing like with like. Others accused him of trying to downplay the issue. In any instance, it did not play out well for him.