Almost half a million people left Ireland between 2008 and 2014 as our economy faltered, then collapsed, and eventually began to claw its way out of recession. Cheap travel and multiculturalism enabled these 21st-century emigrants to disperse further and wider than ever before. Nonetheless the UK has remained a dominant destination for the Irish diaspora, with Britain playing host to over one third of our net outward migration since 2008.
Interestingly, new CSO figures show that inward migration to Ireland has increased by 14 per cent in the past year, and more than 10,000 people have come here from the UK. Many of the reasons for this are well understood. Ireland's economy is currently growing four-and-a-half times faster than the EU average and a staggering 57,100 new jobs were created in the year to June. Moreover, and lest we forget, Ireland is a nice place to be.
According to the 2015 World Happiness Report Ireland ranks 18th out of 158 countries in terms of our subjective well-being – three places ahead of our nearest neighbours.
While macro-economic factors are clearly instrumental in attracting people to Ireland, the role of property and financial markets is less widely appreciated. Nonetheless it could be in critical in bringing returning migrants back from the UK.
Between December 2008 and June 2015 average house prices in London rose from £304,421 to £512,651 – a 68 per cent increase. Elsewhere in the south-east of England property values are less eye-watering. But even in this wider hinterland average prices increased by 43 per cent and now stand at nearly £347,000. As a result people – including Irish expatriates – who bought property in the greater London area prior to 2009 now find themselves sitting on considerable housing equity.
Housing wealth is all very well in theory but, as we discovered during the Irish housing boom, it only becomes meaningful if people sell-up and buy back into a cheaper market. Critically, Ireland has become a very cheap market indeed for UK buyers. There are two reasons for this.
First, despite significant price growth since 2013, the depth of our earlier housing crash means that Irish property values still remain 27 per cent below their December 2008 levels.
Second, since that time, there has been a very pronounced currency swing in favour of Sterling. At the end of 2008 one euro would have bought over 95p. Today the exchange rate is around 73p. The combined effect of these factors is to make Irish property 45 per cent less expensive for a UK buyer than it was six years ago.
Considering all this, there has never been a better time for Irish emigrants to return from the UK. Those who bought property in the south east of England before the housing boom are clearly in the best position as they will benefit from all three windfalls; the UK housing boom, the currency swing and cheaper housing in Ireland. But even those without property in Britain will benefit from the better exchange rate and more realistic house pricing back home – which together account for around two-fifths of the available gains.
While it takes time for people to engineer a move back home, there are signs that expatriates may be beginning to respond to these incentives, and total inward-migration from the UK has risen by over seven per cent this year. An interesting question is how these returning migrants are likely to affect the Irish housing market. On one hand they obviously contribute to population growth which accelerated from 16,500 to 25,800 people per annum between April 2014 and April 2015. It is widely accepted that we have not been building enough new homes to meet demand for some time now, and this increase in the population will inevitably put further strain on the housing stock. In the medium term it is difficult to see how this can result in anything other than continued upward pressure on prices.
The financial position of returning migrants may also influence things. It seems likely that many will come to the market with significant amounts cash. This will put them at an advantage over mortgage-financed buyers who are constrained by strict new borrowing limits, and will enable them to contest more aggressively in competitive bidding. Again, holding everything else equal, this should add to underlying price pressures.
Finally, the age profile of returning migrants may affect the nature of demand. Assuming that many are already in their 30s it seems likely that they will be looking for larger family homes rather than smaller units, and our supply response needs to factor in this consideration.
Dr John McCartney is Director of Research at Savills