As the new government takes shape, addressing challenges, particularly housing, will soon be firmly back on the agenda.
Shortage of supply has been a problem for several years, with figures for required housing supply in the longer term rising rapidly over the past 12 months in particular. Citing housing shortages, French newspaper Le Monde recently ran a pre-election article with the headline: “Ireland is rich. Why do the Irish feel like they’re living in a half-developed country?”
These shortages are – inevitably – resulting in rising prices for property, something that is considered in a new report from Eurostat.
Looking at housing markets across the euro zone and Europe, the report offers some timely insights for the new government. Some of the numbers will not surprise. Ireland has the highest housing costs across the euro zone at double the EU average, higher even than in expensive economies like Luxembourg and Denmark. And our rents are growing at the third highest rate in the EU.
But when it comes to affordability, Ireland fares much better.
Housing costs
Housing was an election issue for a reason; as the analysis shows, housing costs in Ireland in 2023 were double the EU average – higher even than other high-cost economies such as Luxembourg (86 per cent above EU average), Denmark (80 per cent above) and the Netherlands (40 per cent).
Housing costs, which according to Eurostat include the cost of water, electricity, gas and other fuels, were also higher in Ireland than in other non-EU countries such as Iceland and Norway – both known for their high cost of living. Only one country considered by Eurostat has higher housing costs than Ireland, Switzerland, which is outside of the EU. But even there, the gap is narrowing.
In 2010, Irish costs were 17 per cent above EU average while, in Switzerland, they were 67 per cent over that figure. Now Irish costs are 101 per cent above the EU average, compared with 112 per cent in Switzerland.
The lowest costs were observed in Bulgaria (61 per cent below the EU average) and Poland (56 per cent below).
Not just are our costs the highest in the EU, those costs have increased at the strongest rate compared with anywhere else. In 2010, during the global financial crisis, housing costs in Ireland were just 17 per cent above the EU average. In 2023 they had surged to 101 per cent above the average. In Spain, by contrast, prices went from 7 per cent above EU average in 2010 to 2 per cent below it last year.
Property prices
The increase in house prices over the period is, of course, one reason why Ireland is so far ahead of others. While prices rose by 48 per cent across the EU between 2010 and 2023, they rose by 60 per cent in Ireland.
This is not as high as increases seen in countries like Estonia (+209 per cent) and Hungary (+191 per cent) but is well ahead of places like Italy (-8 per cent) and Cyprus (-2 per cent).
Rents are another part of the equation. Given such an increase in overall housing costs, it is no surprise to find that Ireland has also experienced one of the highest rates of increase in rents across the EU in 2010-2023: 98 per cent.
That is the third-highest figure across the Eurostat dataset behind Estonia (+211 per cent) and Lithuania. It is also far higher than the EU average of just 22 per cent.
Figures from the Residential Tenancies Board put average new rents in Ireland at €1,644 a month as of the second quarter, and €2,147 a month in Dublin. According to a separate document from Eurostat, average rents in Dublin for a two-bed flat were €2,550 a month in 2023 – the most expensive in the EU, including the likes of Paris (€2,200), Copenhagen (€1,950) and Madrid (€1,400).
Affordability
With such high housing costs, one would expect an affordability crunch in Ireland. However, this is not the case.
According to the housing cost overburden rate, which shows the share of the population living in a household where total housing costs represent more than 40 per cent of disposable income, Ireland has among the lowest rates.
Just 5.2 per cent of people living in cities spend 40 per cent or more of their after-tax income on housing costs each month, with the figure falling to 4.7 per cent in rural areas.
This compares favourably with other high-cost economies. In Denmark, the overburden cost is 23 per cent in cities, while in Luxembourg it is 22 per cent. And in Switzerland, it’s 20 per cent.
Ireland is fifth from bottom in the rankings, sitting alongside countries such as Lithuania, Slovenia and Cyprus. According to the figures, the EU average was 10.6 per cent last year, falling to 7 per cent in rural areas.
Irish residents also spend less of their disposable income on housing costs than the average EU resident – 17.1 per cent compared with an average of 19.7 per cent. In Luxembourg on the other hand, the figure is as high as 28 per cent.
So why are housing costs so affordable if they are also high? While the report does not make this clear, this is perhaps due to higher-than-average wages and a high minimum wage (second-highest in the EU behind Luxembourg). It may also be down to significant housing subsidies through schemes such as the housing assistance payment.
Home ownership
Ireland is bang in line with EU trends when it comes to owning or renting a home. Across the EU, some 69 per cent own their own home, with 31 per cent renting. In Ireland, in 2023, 69.4 per cent owned their home, compared with 30.6 per cent who were renting.
Significantly however, this is a figure in flux. Just one year earlier, the figure for ownership was closer to 71 per cent while back in the early days of the Celtic Tiger in 2004, the figure reached a peak of 81.8 per cent, according to Eurostat.
Such high rates are still in evidence in parts of the EU, particularly among former Eastern bloc countries. In Romania, 96 per cent of the population owns their own home, followed by Slovakia (94 per cent) and Croatia and Hungary (both 91 per cent).
Owning is more common than renting in all EU states apart from Germany, where 52 per cent were renting compared with 48 per cent owning. Austria (54.3 per cent); Denmark (60 per cent); and France (63.1 per cent) also had below average home ownership rates.
Outside the EU, Switzerland was also noted as having a particularly low home ownership rate of just 42.6 per cent.
Property size
It will come as no surprise, perhaps, to learn that Ireland has the greatest proportion of people living in a house rather than an apartment across the EU, Norway and Switzerland, at almost 90 per cent. This jumps to almost 97 per cent when considered on a rural-only basis.
Irish city dwellers also have the highest proportion of people living in a house at 81 per cent. This compares with just 33 per cent in France and 21 per cent in Germany.
A new metric shows that some 0.1 per cent of the Irish population now lives on a houseboat, in a mobile home or some other nontypical type of home.
Ireland’s figures are some way north of EU norms, where about 52 per cent live in a house, and 48 per cent in a flat. This falls to just 27 per cent in a house across the EU’s cities.
Spain has the lowest proportion of people living in a house, at just 34 per cent.
Not only are Irish people more likely to live in a house, those houses are also bigger than the average across the EU. The EU average is 1.6 rooms per person; in Ireland it is two rooms.
Perhaps this can be explained by other data showing we also have bigger-than-average households. While the EU average is 2.3 people per household, we have 2.7 people – the third-highest in the bloc.
Nonetheless, we still have a high proportion of underoccupied homes – defined as properties that are too large for the numbers living in them. In fact, Ireland has the third highest rate in the EU, at 66 per cent (down from 72.5 per cent in 2010), behind Cyprus and Malta. This compares with an EU average of 33.3 per cent.
“The classic cause of underoccupation is older individuals or couples remaining in their homes after their children have grown up and left,” the report says.
Finally, the report also shows that the Government’s retrofitting grant programmes, in their various guises, appear to be working. According to the study, 28.4 per cent of the Irish population aged 16 and over lives in a property whose energy efficiency has improved in the last five years.
Not as good as the Netherlands, where the figure is as high as 58.5 per cent, but better than the EU average of 25.5 per cent.
- Sign up for Business push alerts and have the best news, analysis and comment delivered directly to your phone
- Find The Irish Times on WhatsApp and stay up to date
- Our Inside Business podcast is published weekly – Find the latest episode here
