Irish house prices rising 14% faster than incomes, or double EU average

There are two basic forces fuelling Ireland’s housing crisis: supply and price. One is too low, the other too high. The Government and industry are banking on the old supply-and-demand laws resolving the pricing issue but there is little evidence it will. The housing market doesn’t conform to the simple laws of supply and demand. Even at the high-water mark of construction in 2006, when a record 92,000 homes were built, property prices surged by 14 per cent. Back then the cost of construction was also soaring despite the fact we had an extra 100,000 construction workers in the country.Real estate is a financial asset: when price goes up, investors follow, stoking further demand. This creates a positive feedback loop, one in which property values become increasingly detached from incomes. READ MOREEurostat’s latest house price-to-income ratio report, published on Monday, suggests this detachment is continuing.The growth in house prices relative to income in Ireland between 2015 and 2025 was estimated at 14.4 per cent, more than double the EU average (6.8 per cent), the report reveals.In other words, house prices have grown 14 per cent faster than incomes over the past decade, resulting in a further deterioration in buying power.Ireland wasn’t the worst either. Portugal recorded the largest increase in the house price-to-income ratio (60.8 per cent), followed by the Netherlands (34.3 per cent), Hungary (26.5 per cent), Czechia (25.8 per cent) and Spain (24.5 per cent). At the other end, Romania recorded the largest decrease (-42.8 per cent), followed by Finland (-25.2 per cent) and Bulgaria (-16.2 per cent).[ Top finance officials worried about billions in debt racked up by housing bodiesOpens in new window ]“These figures compare price changes relative to income changes over time; as such, they do not rank countries by how expensive homes are in relation to income levels in absolute terms,” Eurostat said. Governments globally are increasingly ineffective in getting to grips with housing affordability. Rent supports and help-to-buy schemes are being used as stop-gaps as more and more would-be buyers get priced out of the market. While increasing the supply of new homes is necessary to moderate inflation, the trend away from home ownership as a result of high prices is unlikely to abate anytime soon.