Homeownership collapses as costs now classed as 'severely unaffordable'
Owning your own home is now out of the financial reach of many people and families in Ireland. File photo.
Homeownership has collapsed among working-age adults, with housing costs now classed as “severely unaffordable”, according to a new report from the Parliamentary Budget Office (PBO).
The report published by an independent wing of the Oireachtas said house prices increased by 77% between 2012 and 2020, while rental accommodation availability is at its lowest levels since the Celtic Tiger.
The PBO published the second of its two-part series on the housing market, this time looking at affordability.
While house prices increased by over three-quarters between 2012-2020, wage growth was just 23% in the same time period.
During the Celtic Tiger era, house prices increased by an average of 12.6% per annum. In the 12 months to October 2021, house prices rose by 13.5%, with growth now outstripping the boom years.
While Dublin properties were, on average, 1.55 times more expensive than house prices nationally, this could be shifting.
“However, this trend may be starting to shift as potential purchasers are priced out of the Dublin market and look to commuter counties, as was seen in the past,” the report said.
On the issue of mortgage lending, the PBO said that following a significant slowdown in 2020, mortgage market activity rebounded in 2021.
For those who could still work during the pandemic, and while society was largely shut down, it resulted in a shift from consumer spending to savings, it said.
While this saving may have helped some raise enough for a deposit, it has also pushed up house prices.
Rising rents, meanwhile, are “delaying the purchasing of a home”, the PBO said.
“This is best illustrated in the decline in people aged 30 or under buying a home, falling from 60% in 2004 to 27% in 2020,” it said, adding that rents have more than doubled in Dublin in the past decade, and cities are becoming more expensive due to a lack of affordable houses.
The report cited the Demographia International Housing Affordability Survey, which classes price to income ratio as being “moderately affordable” between 3.1-4, “seriously unaffordable” from 4.1-5, and “severely unaffordable” anything over 5.
If we were to take the median property price in Ireland and the median salary, this ratio would be 6.
The report also points to a study from Eurostat which found that 36% of Irish people aged 25 to 29 live at home with their parents, as homeownership levels have dropped significantly in the past 15 years.
"The high cost of housing can lead to deprivation, exclusion, and poverty at the household level and to lower levels of consumption and economic growth at the national level.”
