James Cox
Ireland's population growth is exceeding the pace of homes being built by almost four to one, according to a new study.
New market analysis by property advisor, Savills Ireland, looks at Ireland in an international context, examining how it compares with eight other advanced western nations across key housing market metrics of population, housing supply, house prices, rents and affordability.
While countries across the world are facing housing shortages, new analysis from Savills demonstrates the extent to which Ireland is an outlier in the severity of its housing supply challenge.
Looking at population growth in comparison to housing delivery between 2015 and 2023, the analysis shows that 3.8 people were added to the population for every one new unit of housing delivered, a ratio of nearly four to one.
This is by far the worst among the countries analysed and 14 per cent higher than the next worst country, Spain, which saw 3.4 new people per one new unit delivered, followed by Canada with a ratio of 2.9.
Ireland's housing crisis worse than UK and US
Ireland’s ratio was 80 per cent worse than that of the United Kingdom (2.1 ratio) and double that of Australia (1.9 ratio).
It was also significantly worse than the United States (1.5) and Germany, the latter of which had a ratio of less than one person (0.9) for every one new housing unit delivered.
While housing shortages are a common narrative across advanced western economies, "Ireland really does stand out alone in its severity," the researchers said.
Population growth
The primary driver of this ranking in Ireland is population growth. At 1.5 per cent per annum, it is the fastest growing country in the sample along with Canada and Australia, which are also growing at the same rate.
While Canada, like Ireland, is also struggling to account for the growing population (2.9 population growth per one new household), Australia is faring much better with a ratio of 1.9 of population to new housing growth.
By contrast, Spain’s poor ratio of 3.4 (only behind Ireland), is primarily due to an inability to ramp up housing supply rather than keep track with an expanding population, as it has witnessed population growth of just 0.5 per cent per annum over 2015 to 2023.
Last year, Spain delivered just 90,000 new housing units – a figure some have muted as the appropriate target for Ireland – but for a population of 48.6 million people.
Immigration
Germany’s ageing population is evident with just 0.3 per cent average population growth over the period, with immigration driving it into positive rather than negative territory.
While immigration has fuelled Ireland’s population growth as well, Ireland also has by far the highest natural population growth (births minus deaths) in Europe. The researchers said this was a key factor in Ireland's struggles to match population growth with housing supply.
John Ring, director of Research at Savills, said: “While it is true that many countries across the world are facing housing shortages, it is important to recognise that the severity of Ireland’s is on a different level to others."
Mr Ring added: "Ireland has unique drivers – a delayed natural population boom, high migration due to strong economic growth, and structural legacy issues resulting from the Celtic Tiger crash – that explains why Ireland has the unenviable position having the worst supply to population growth of the countries analysed. At present, we are running to stay still and a more aggressive approach to promoting new housing supply is warranted compared to our peers.”
Housing affordability declining despite rising incomes
Looking at the effect of this population-supply imbalance on housing affordability "yields some interesting results".
Ireland has experienced income growth of 27 per cent (second only to the United States) between 2015 and 2022 (latest data across the sample), while residential purchase prices grew by 66 per cent, a differential of just under 40 per cent.
This places us in the middle of the road (fifth) of the nine countries examined, despite having the worst house building to population growth dynamic. Compare this with Canada, which saw its prices grow by 104 per cent, but incomes grow by 23 per cent, a differential of 81 per cent.
Central Bank rules
The reason Ireland hasn’t seen a run-up in house price growth – despite the poor supply dynamics outlined earlier - "can largely be attributed to the Central Bank of Ireland rules introduced in 2015 which placed limits on the amount that people can borrow to purchase a home".
The mortgage lending rules introduced a limit on the amount a buyer can borrow relative to both the value of the home and their income. The latter was initially set at 3.5 times the buyers’ income, with that threshold raised to four times the income of first-time buyers in January 2023.
The Central Bank rules "are a positive, and increases the stability of both the banking system and the wider economy, ensuring that a repeat of the previous boom-bust cycle can be avoided," the research found.
However, while the measures have protected the stability of the purchase market from becoming over inflated from a pricing point of view, "the lack of supply has meant that inflation has been funnelled into the rental sector as people that would have bought are forced to rent, thereby adding to demand for this market segment".
