IRELAND’S HOUSING CRISIS is a big, scary, complicated problem.

If it wasn’t, it would’ve been solved by now by the armies of experts, politicians and businesspeople who have spent years trying to crack it.

Essentially, the balance between supply and demand is out of whack. Because there are so few new homes being built, there’s too much demand, which has caused prices to soar.

But one thing that most agree on, is that the cure is, in principle, fairly straightforward – build more homes.

Build lots more homes, prices will calm down again.

The exact workings of how that happens may be harder – getting enough labour, working through planning, etc.

But at its core, fixing all these issues is in service of what appears to be a relatively simple goal.

Build lots more homes. Then properties will become more affordable to ordinary people who want to buy somewhere to live.

While the crux of that thought process seems fine, an issue which tends to be overlooked is – time.

If we build lots more homes, how long will it take for homes to become more affordable? Particularly to someone on a typical salary?

Demand

Let’s think first about the demand side of the equation.

In a country with a growing population, a certain number of new homes need to be built every year to keep up.

The Census has the best data on this, and it found Ireland’s population rose by 8.1% between 2016 and 2022.

But Irish property prices rose by way more than this during the same period, jumping by about 60%.

This is because a bunch of other stuff also factors into demand, besides population. Investors buying cheap Irish homes in the wake of the property crash, changes in the size of households, etc.

As this can be hard to predict, there are wildly different estimates of the supply of new homes Ireland actually needs to keep up with demand.

Supply

In the last year alone, predictions have ranged from as low as 35,000 to as high as more than 90,000.

The Central Bank figure of about 52,000 new homes per year is the one most accepted by policymakers.

The organisation also recognises that Ireland has a major backlog of unmet housing demand, because not enough homes were built during the financial crisis. Most estimates put this backlog at somewhere just under 200,000 homes. This is factored into the figures to arrive at the 52,000 number.

But it comes with a caveat. This was the Central Bank’s estimate for the average number of homes built per year between 2023 and 2050.

This is how long it could take to deal with the backlog.

And it’s worth noting, the backlog is likely higher than estimated. Every year Ireland builds less than 52,000 homes, that number goes up.

We delivered about 30,000 in both 2023 and 2024. So the backlog has increased by about 40,000 in just two years.

Affordability

Another peculiar aspect of Ireland’s housing crisis is that it’s rarely examined what we mean when we say we want property to become ‘more affordable’.

Does that mean we want prices to fall? Continue rising, but at a rate below wage inflation? Or just remain about the same?

And for all of these scenarios – how big do we want the change to be? 1%, 10%?

For the sake of argument, let’s say we want to keep house price growth roughly in line with salaries.

The most recent data we have shows average pay rose by 5.3% in the 12 month period to the end of September 2024.

Property prices rose by 10% over the same period.

So we want property prices to lower by 4.5% – just how many new homes does that involve?

Stock

Previous studies estimate that a 1% increase in the country’s stock of property lowers prices by up to 2%.

For example, this one from the Greater London Authority. This lines up with other UK studies and research carried out in New York which found a similar effect on both sale and rent prices.

What does that mean? Housing ‘stock’ refers to the total number of homes in a country – in Ireland, it’s about 2.1 million.

So a 1% increase in ‘housing stock’ means building an extra 21,000 homes.

Ireland built just over 30,000 homes in 2024 – a rise of about 1.5% in the housing stock.

But prices obviously didn’t fall – they jumped up by almost 10%.

That’s because this theory of ‘1% housing stock rise = 2% price drop’ only theoretically works when the market is already in balance.

But Ireland’s market is very unbalanced, with a big pent up demand for property.

Okay, so say we get to the target of building 52,000 homes a year. If we added an extra 21,000 new properties on top of that – the ‘1% housing stock rise’ – does that mean prices would fall by 2%?

Well, probably not. Remember that 200,000 backlog? (Now likely 240,000 with the 2023 and 2024 figures added in.)

We have to get rid of that first before the market comes into balance.

But say we do eventually get rid of it, and then reach an ‘equilibrium point’.

This is when we would start adding 1% housing stock a year on top of the 52,000 homes.

At this point, prices should start to moderate.

Targets

Maybe you can see where we’re going with this. 

Ireland is nowhere near building or 52,000 homes a year.

Say it takes five years to go from the current level of 30,000 to 52,000 – which is likely optimistic, but let’s roll with it.

It could then be another ten years before this new supply cuts into the backlog and starts putting noticeable downward pressure on prices. 

So a 30-year-old currently living with their parents hoping to buy a home could be waiting well into their mid-forties if they’re relying on supply alone fixing the problem.

And even once that point is reached, the difference likely wouldn’t be enormous.

Again, say we were currently at the equilibrium point and delivering 1% of new housing stock a year above what was needed.

And say prices moderate by 2% as a result.

Well, Irish property prices rose by 10% last year. 

If we delivered 1% extra housing stock on top of what was needed, the 10% rise becomes an 8% rise – still above wage growth.

To get it below wage growth, we’d have to deliver 3% additional housing stock above the current level of annual demand. 

So that would be 21,000 x 3 = 63,000. Plus 52,000 (current demand) = 105,000.

And after all of that, and property prices wouldn’t even fall. Just increase at a level below wage growth.

Wanting prices to fall any significant amount would mean even more homes. And even more time to deliver that extra supply.

It’s worth acknowledging that, like with many economic ‘rules’, the finding of ‘1% housing stock rise = 2% price drop’ likely wouldn’t translate neatly into the real world.

There is likely not a completely linear relationship between the two.

It’s possible that if there was a consistent strong delivery of housing supply, above what was needed to meet natural demand, prices could fall faster than expected.

This could be because people would predict falling property values in the future, causing them to sell for a lower price in the present, and so on.

More supply at a lower price point could also have a bigger impact. If builders were able to become more efficient and quickly deliver vast amounts of low cost housing, it could have an effect. Although, this is not something which currently looks likely.

Alamy Stock Photo Alamy Stock Photo

This is to say – new supply isn’t pointless. It is of course important. Any positive impact is welcome. 

And Ireland’s failure to build enough homes is almost universally acknowledged as a major contributor to current property price inflation.

But we should be realistic about how quickly new supply would make a real dent in the problem. 

The ‘1% housing stock rise = 2% price drop’ finding can at least be used as an indicator. And it signals that while supply can be the main tool to fix the housing crisis, it could take a long time for that effect to be felt.

This is most important for people currently around house buying age.

On a long enough timeline, Ireland could chip away at its housing backlog over the years, slowly bringing price inflation under control.

But thirtysomethings looking to buy in the next five years or so, hoping that new supply will make housing more affordable – well, be aware.

You might be waiting a while.