The latest CSO house price figures are despairing for Generation Locked Out.
House prices continue to increase, pushing the possibility of a secure affordable home further out of reach. The new ‘affordable’ shared equity scheme will add fuel to the flames of a private housing market that is consistently failing to provide a sufficient supply of new homes, while Government policy worsens the supply crisis through a hopelessly inadequate level of new build social and affordable housing.
House prices are now just 1% off their Celtic Tiger peak.
Residential property prices grew by 14.4% in the year to Mayhttps://t.co/bVv1A3Pz9B #CSOIreland #Ireland #Housing #HousingConstruction #HouseBuilding #NewDwellings #PropertyPrices #HousePrices #PlanningPermissions #IrishBusiness #BusinessStatistics #BusinessNews pic.twitter.com/UPkRThZ0Lm
— Central Statistics Office Ireland (@CSOIreland) July 12, 2022
In Dublin, property prices increased by 11.7% in the year to May, while outside Dublin prices were up 16.6%. The south-east had the largest rise at an eye-watering 21.5%, while they were up 18% in the south-west. The average price of a house in Dublin is now a terrifying €510,000, up from €465,000 just a year ago.
In Kildare it is €354,000, up from €332,000; in Cork City it is €311,000, up from €296,000; and in Waterford it is €248,000, up from €213,000.
Existing dwellings were up 17.8% annually, compared to new builds up at 6.2%. Existing homes were 82.5%, or 3,079, of all dwelling purchases in May, with just 17.5%, or 652, new homes bought.
This shows the low level of new home builds available for homebuyers. In 2021, 20,433 homes were built, but just 7,568, or 37%, of those were bought by home buyers. In the first five months of this year 2,999 newly built homes were bought by households, the same number as in pre-pandemic 2019.
Housing supply for homebuyers remains at anaemic levels. In some counties the level of supply is atrocious. From January to May this year, just 20 new-build homes were sold in Tipperary, with just eight bought by first-time buyers. Just 39 were sold in Kerry, four to first-time buyers, just 63 were sold in Limerick, 49 to first-time buyers, 136 were sold in Waterford, and 449 in Cork City.
Making this low supply worse and locking homebuyers further out of the market is the number of homes bought by ‘non households’ – mainly investor funds, real estate investment trusts (REITs), and property investors, but also local authorities and approved housing bodies (AHBs).
They bought over a third (1,600) of newly built homes this year. In Dublin, they bought a staggering 58% (1,015) of newly built homes, while first-time buyers bought just 21% (367).
Headline national housing supply figures are misleading as they hide this dominance of investor fund build-to-rent and bulk purchasing and the failure of the market to build affordable homes for homebuyers. This leaves huge price pressure on the existing home market.
Adding to house price inflation is the failure to build a large-scale supply of new social and affordable housing and ‘demand’ side measures like the new First Home ‘affordable’ purchase scheme.
First Home is likely to make housing more unaffordable. The shared equity scheme is not about reducing house prices, but lumping first-time buyers with more debt so that they can pay the market prices sought by developers.
It is about meeting the profit demands of developers not housing needs of homebuyers. In a market with constricted supply, adding more debt to homebuyers will inflate prices further.
In the supply side for which the Government is responsible, such as social housing, the latest figures are startlingly poor.
Housing for All promised 9,500 new-build social homes per year, but last year just 5,202 were built. And in Q1 2022 social housing completions collapsed to just 639 new social homes, the lowest since Q1 2021.
New social housing is being built by local authorities and approved housing bodies (AHBs such as Cluid, Respond). Local authorities built just 250 homes in Q1 2022, and AHBs built 294. But there were 18 counties where not one local authority built a home in Q1 2022.
In 10 counties, neither local authorities nor AHBs built new social housing, including Dublin City Council, Fingal, Galway, and Kildare councils. Cork City Council did not build one council home in Q1 2022. AHBs built just three.
Overall these figures suggest only 2,500 new social homes will be built this year, a fraction of the 9,500 new social build targets.
The need for an increase in State investment in the actual building of social and affordable housing is even more urgent now given the cost of living crisis worsening the rental and house price crisis.
The Government says it is investing “a record level of funding” in housing. But of the €4bn annual housing spend, just over a third is going to private landlords, REITs, and developers, in rental subsidies and leasing. Such ‘current’ spending provides no new-build social housing. Less than a half of the annual housing budget (under €2bn) is on new-build social and affordable housing.
Government appears to be blinded by its own spin. Its Summer Economic Statement claimed there was “a rebound in housing output”, yet the ESRI points to a slowdown in house building in parts of the country.
It states “Dublin and Mid-East region (Louth, Meath, Kildare Wicklow) has experienced a notable moderation in the number of units completed. Given the requirements for housing units in the capital city and surrounding areas, it is notable these areas have experienced quite a slowdown over the past 12 months.”
It is downgrading its forecast for housing completions in 2023 to 27,000 units. High prices and uncertainty over inflation and cost of living is resulting in a contraction in construction sector, some builders are pausing their developments. This will exacerbate the housing shortage.
The ESRI figures on the collapse in homeownership rates shows the scale of the social and economic catastrophe facing the country in housing. The homeownership rates among 25- to 34-year-olds more than halved between 2004 and 2019, from 60% to just 27%. This means a higher proportion in the rental sector making rental payments into retirement.
The ESRI found that reductions in homeownership of this magnitude could lead to a doubling of older people living in income poverty. This is an existential and fundamental threat to the future of our country.
Where are generations going to live securely and affordably? Where can they set up their secure base to start a family? Where will workers be able to afford to live and retire?
The cost of living crisis, economic uncertainty, persistent low level of new-build homes for sale by the market, with indications of market volatility and worsening of supply, shows that this Government must make a massive shift in policy and investment in social and affordable housing if it is serious about solving the housing crisis.
It should double the ‘capital’ spend on new building of social and affordable housing in September’s Budget and form a State construction company to guarantee delivery.
Why has the Government not yet got to grips with the housing crisis? It is still tinkering around the edges trying to incentivise a dysfunctional market, when its overreliance on the private housing market is the root of the crisis.
It does not seem to really understand the true scale of the social catastrophe hitting Generation Locked Out.
- Rory Hearne is assistant professor of social policy at Maynooth University