Housing boom or bust?
Even though we are still struggling through a pandemic that has reduced GDP, house prices in Ireland have increased by 13% over the last year. And not just in Dublin; prices are up by 18% in Munster, 16% in Leinster and 15% in Connacht and Ulster. What’s more, this is not just an Irish phenomenon. House prices have increased by 13% in the US, while Germany, Netherlands and the UK have all seen increases over 10%.
For homeowners, house price increases are good news, existing homeowners are all getting wealthier as the market rises. But while homeowners are experiencing a boom, aspiring homeowners who are not on the property ladder are experiencing a destructive and dangerous bust.
The main cause of this simultaneous boom and bust is a shortage of housing and home building. The pandemic slowed down new home construction. Planning delays and objections are slowing development. New building regulations make it more difficult and more expensive to build. The legacy of the financial crises means mortgages are difficult to secure. Then add to the mix the competition for houses brought by a range of funding players from homelessness charities to cuckoo funds.
Faced with this environment, first time buyers, especially the younger generation, are finding it impossible to buy homes. They are being forced to rent or to stay at home with their parents, parents who at the same age owned their homes. The property bust this generation is experiencing is one they may never recover from. Many young people now believe that they will never own homes.
What might be a boom for those of us who are homeowners is building up a serious problem for society. Every generation since the foundation of the State has improved its lot on the previous generation- this may be about to change. With the housing solutions very hard to fathom, there is bound to be a day of reckoning.
Have you benefited from the boom or suffered from the bust? What is your solution to help first time buyers?