Rory Hearne: Shift to remote working is bumping up regional house prices
House prices are surging around Ireland, and especially in Munster, Connacht and Ulster, in part due to people relocating, with the shift to remote working under Covid. File picture: Pexels
The latest wave of Covid appears to be receding, restrictions are being lifted, and people are feeling hopeful. But, unfortunately, when it comes to housing, things are getting worse if you are looking to buy a home. The latest figures show property prices increased by a whopping 14% in November.
But it was outside Dublin where prices increased the most. In the border counties, prices increased by a phenomenal 23%, in the South-East by 20%, the Midlands by 17%, and the South-West by 14%. Prices cannot, and should not, be allowed to continue to rise like this. Something has to give.
Prices of existing dwellings are now 105.8% higher than their trough in 2012. The Parliamentary Budget Office’s report pointed to surging house prices and rents contributing to the fact that “homeownership has collapsed among adults aged 25-54 since the financial crisis”.
It revealed housing has become significantly more unaffordable over the last decade. Property prices were four times higher than median incomes in 2013, but now in Dublin property prices are eight times the median income, in Wicklow they are 7.7 times, in Kildare 6.7 times and in Cork county, 5.5 times. All are classed as “severely unaffordable”.
House prices are surging around Ireland, and especially in Munster, Connacht and Ulster, in part due to people relocating, with the shift to remote working under Covid.
The latest CSO snapshot on remote working asked if people would consider moving house if they could work remotely. It shows 13% of 18- to 34-year-olds and 8% of 35 to 44-year-olds have already moved. More than half of 18- to 34-year-olds said they would move if they could work remotely. Unsurprising, as they are most affected by the unaffordable rents. Significantly, 12% would move out of Ireland, a high level of potential emigration.
Interestingly, almost half of people in employment in Dublin would consider a house move, if they could work remotely, and a quarter would move county. In contrast, just 8% in the South West would move county. Almost 10% of those in employment in Dublin would leave the country if they could work remotely. These trends will continue to feed into further price pressure on housing across the country.
In a bit of good news, the GeoDirectory report out last week showed new housing commencements rising, with 30,537 recorded in the 12 months to November 2021. But given the context of shifting housing demand related to remote working, it is worth noting that 57.6% of all commencements are in the Greater Dublin Area. But it has just 40% of the country’s population.
Leinster accounted for 71.6% of commencements. The share of homes commenced in Munster, Connacht, and Ulster declined year on year by 2.6 percentage points, 1.2 ppts, and 0.8 ppts, respectively.
But an even bigger issue identified by the authors of GeoDirectory, EY Economic Advisory, is the severe underestimation by Government of the real level of housing demand. The Government’s Housing For All plan targets a supply of 33,000 units per year.
Yet EY states that this excludes a "latent" demand of 225,000 homes: “The shortfall in supply over the period 2011-2021, including ‘latent’ demand [housing demand which was not met] in the housing market, has been estimated by EY at over 225,000 homes, due to years of undersupply, inward migration and evolving demographics.”
This means that even if Housing For All meets its targets, the housing crisis will continue, because the annual supply needed is closer to 55,000 homes per year.
Another connected issue with new supply is that a lot of it is being bought up by investor funds. This pushes home buyers out of the new homes market and corals them into competing with each other to buy second-hand/existing homes, which pushes up existing home prices. And this is what is happening.
Latest figures show existing home prices increased by 13%, but new home prices increased by just 3.3%. My analysis of figures for October 2021 reveals that ‘non-household buyers’ (mainly investor funds, but also local authorities and social housing bodies) bought over a third of all new homes sold in the country. They bought more than first-time buyers.
In Dublin, it is even starker. More than half (52%) of all new homes sold in Dublin were bought by non-household buyers. They bought twice as many new homes as first-time buyers (who only bought a quarter of new build homes in Dublin).
The measures introduced to reduce the role of investor funds in buying up homes after the public outcry last May are clearly not working. Investor funds continue to dominate the new homes market. The issue with this is not only is it reducing the ability of first-time buyers to buy a home, it also adds to house price pressure in the second-hand homes market.
This again points to the need to tackle the untapped potential supply of vacant and derelict properties, which was also highlighted by the GeoDirectory report. The failure to take the vacancy and dereliction issue seriously by successive housing ministers was laid bare by the fact there are 110,000 vacant or derelict homes. That is equivalent to over three years of new supply of homes.
For the first time, the number of derelict properties was measured (uninhabitable, unlike vacant homes which are empty but of liveable standard). 22,000 derelict properties were identified, and this is likely to be an underestimation. Ten counties had more than 1,000 derelict properties. Mayo had the highest with 2,924 derelict properties. Cork had the fourth highest in the country with 1,448 derelict homes.
While most counties saw a welcome fall in the number of derelict properties since 2016, in two counties, Sligo and Tipperary, derelicts actually increased. Sligo has 1,200 derelict properties, but just 20 properties advertised to rent on Daft.
There is a real opportunity here. People want to move out of Dublin and Leinster to other parts of the country, and it is possible with the shift to remote working. But they need affordable homes to rent and buy. The State needs to really tackle dereliction and provide new building in regional cities and towns to deliver this.
- Rory Hearne is assistant professor of Social Policy at the Department of Applied Social Studies, Maynooth University
