There was no good news in the latest house price inflation figures, with a 14.4% rise in annual prices deepening the affordability crisis in key market segments. There are signs that housing supply is set to increase but inevitably this process will be gradual and big questions remain about the pace at which improvements can be made.
The halt in construction activity for a time during the pandemic and the difficulty in getting the normal sales process to work had an impact that was difficult to disentangle from the data. The same is evident in many other international markets. Trends later in the year, when much of this distortion has disappeared, will be worth watching. Most observers expect prices to continue to rise, but at a slower pace as demand is expected to remain strong.
With prices now approaching their Celtic Tiger peak, there are no signs of the kind of dangerous buildup of household borrowing seen at this time. Central Bank lending rules – and household caution – both played a role here. But the sharp rise in prices in recent years and the lack of supply of more affordable properties, especially in urban areas, have left many people excluded from the market, with enormous social and economic consequences. Record high rents, meanwhile, are the other – and related – side of the housing crisis.
There is no doubt that this will be a defining social and political issue for the remainder of this government’s term and beyond. After having published its housing plan, which undertakes to spend some 4 billion euros per year, it is now up to the Government to implement it, in particular on the main supply measures. Achieving this, with all the complexities involved and in an era of rising construction costs, will require relentless focus.
Sinn Féin, meanwhile, says the additional funding set aside is still not enough and that its policies will lead to faster roll-out of social and affordable properties in particular. This is an area where the opposition has gained ground with voters, although whoever is in power will face many of the same obstacles.
Despite the political noise, all parties now agree that massive public resources must be allocated to the housing crisis over the next few years.
The real crux is not how much should be spent – although that is up for debate – but how progress can be made. It’s about how to harness the limited resources of the state – including land and cash – the construction industry and private sector financing to deliver something better. There is no magic bullet, but progress can and must be made.
If the current government fails to do so, then it knows it will pay the price in the next general election.