Philip Slattery, a 35-year-old accountant living on Dublin’s outskirts, has been searching for a home for three years, first on his own, then with his partner and the three children in their family.
A severe shortage of housing in their area has stoked a surge in property prices, with properties often going for €20,000 or €30,000 over their asking price — a chunky premium given that Dublin’s average sales price is about €396,000.
“I’m thinking I’ll have to win the Lotto,” Slattery said of his chances of owning a home.
Dysfunction has been the defining feature of Ireland’s property market for decades, most dramatically in the boom to bust era of 2000-2010, as prices spiralled out of control and fell sharply in the crash that followed.
Now the country is in the midst of a different kind of crisis.
Ireland expects to build just 21,000 houses and apartments this year, as tighter lending conditions, coupled with coronavirus-related delays, push supply well below the more than 90,000 homes a year built at the peak in 2006.
The result is a shortage of accommodation that could last for years across everything from one-bed apartments in Dublin’s city centre to family homes in the suburbs and regions. Meanwhile, until their luck changes, Slattery lives with his parents and his partner and the children live with hers.
The current situation is worlds away from the days of easy money in the mid-2000s that presaged the 2008 financial crisis, said Dermot O’Leary, chief economist at Goodbody, a stockbroker.
Today, caps on mortgage borrowing leave buyers with budgets “so low . . . it excludes a significant cohort of people from purchasing a home,” he said. As for builders, access to credit and Ireland’s high cost of construction relative to sale prices makes it hard for them to increase output to the 35,000 units a year the market needs.
In commuter towns near Dublin, the housing shortage was not helped by a US investment fund, Round Hill Capital, which in April swooped on 135 of the 170 houses for sale in one development. It was the final straw for the wider public, the government and the many families, couples and individuals struggling to find suitable homes.
Goaded into action, the governing coalition responded by imposing a 10 per cent stamp duty for anyone buying 10 or more houses over a 12-month period.
The finance ministry said this would offer a “significant disincentive” to investors who were “denying first-time buyers an opportunity to purchase a home”.
Whether that is the best approach to the problem remains an open question and a hotly debated political issue. “You had a media furore over a certain topic, within two weeks you had policy formulated. That’s not the way housing policy should work,” O’Leary said.
The problem is not unique to Ireland. In Germany, scarcity of supply and sharply rising rents have turned housing into one of Berlin’s most contentious issues, as recently highlighted when Vonovia, Germany’s largest residential landlord, combined with a rival in an €18bn merger.
To help clinch the deal politically, the companies committed to selling some flats to local authorities without a premium, commit to certain rent freezes, and build additional flats.
In the meantime, the Irish housing market is in a frenzy, said Andrea Whelan, a Dublin-based estate agent with Sherry FitzGerald.
She said she had “never had a stronger database of qualified and ready to go buyers” in her 23 years in the business, but the mood among them was “a sense of anxiety . . . of frustration”.
A by-election in the Dublin area of Bay South on July 8 gives politicians an extra incentive to weigh in on the issue.
The stakes are highest for Fine Gael, the third biggest party in parliament and second biggest in the governing coalition, which may lose its seat in the vote.
Simon Harris, Ireland’s education minister and the Fine Gael party’s director of elections in Dublin Bay South, said it was “really important” that the government acted on investment funds to deal with the housing market.
Leftwing Sinn Féin, the biggest opposition party and second biggest party in Ireland’s parliament, meanwhile argues that the government generally should do much more, including extra capital gains taxes for property investors and more social and affordable housing.
“If you genuinely believe the election is an opportunity to send a signal to the government . . . then let’s make this election a referendum on our failed housing policy,” Eoin Ó Broin, Sinn Féin’s director of elections for Dublin Bay South said.
One question is whether the stamp duty investment funds must now pay on bulk purchase of houses might be extended to apartments, the sector where international institutional investors are typically most involved, accounting for almost a fifth of sales in 2018.
“The only people building apartments are people supported by international capital,” according to a senior executive at a large real estate investment company.
If that is the case, the prospect of further government action is an inauspicious omen for both investment funds and future apartment construction.
Jim O’Callaghan, who runs the Dublin South Bay by-election campaign for Fianna Fail, the biggest party in Ireland’s governing coalition, said extending the tax to apartment sales is what a lot of people in the party wanted. “We may have to revisit the issue,” he said.