Normally property prices fall at times of economic difficulty. But the peculiar economic impact of the pandemic – and the dysfunctional state of the Irish property market – mean prices are moving in the opposite direction. Given that houses were, on most estimates, fully valued before the pandemic hit – and already at levels which left many people priced out of urban markets – this is unwelcome.
Two factors are supporting prices. As is happening in some other countries, demand is being propped up by people working in sectors not overly-affected by the pandemic. The build-up of pandemic savings – money not spent due to restrictions – is probably also having an impact. The second factor is a familiar one – the lack of supply, made worse by the closure of the house-building sector for some months last year and again this year. Second-hand supply, meanwhile, has been hit by the pandemic.
As a result, prices rose by 3 per cent in February compared to one year earlier, according to the latest data from the Central Statistics Office (CSO). Asking prices are rising even more rapidly. Prices are increasing faster outside Dublin than in the capital. This may indicate a move to more affordable accommodation as people hope to continue working from home after the pandemic. The stock of property on the market is low and prices could rise further in the months ahead, forecasters believe.
While the Government has been tied up with the huge demands of the pandemic, housing remains a central social and economic issue. Many people in reasonably-paid jobs are simply priced out of the Dublin market – and only a minority will have the option of working from home in more affordable locations on an ongoing basis. There is a particular shortage in some areas, for example smaller accommodation.
It is an area requiring urgent policy attention, but the nature of the Irish planning system – and the time and cost of building – make this difficult. The Government has ambitious plans in terms of boosting supply, particularly of social and affordable housing. The Land Development Agency will play an important role, through harnessing State land. While supply is urgently needed, plans to subsidise buyers through a new scheme in which the State will take an equity stake risk pushing up prices in the short term.
Beyond the pandemic, this is one of the areas which will define the Government’s term in office. It is clear now that a lot of public money will be spent in this area – and essential that it is spent efficiently. There is, unfortunately, no quick fix. It is a question of examining every part of the process – planning, construction, the cost of building and so on – and pushing on relentlessly. Covid-19 required an emergency response but housing is a crisis too, albeit of a different nature.