Housing supply at root of affordability squeeze
In his foreword to a report on the affordability of the housing market last summer, Professor Peter Clinch, chairman of the National Competitiveness Council, noted the impacts of the amount of money needed to pay a mortgage on a monthly basis.
"What is clear is that affordability matters for the individual household, for society as a whole, and for national competitiveness. For the individual, or household, buying a house is their single biggest lifetime purchase, while the cost of owning or renting a home takes a large share of household income. From a societal perspective, a stable and functioning housing market that meets the needs of all of the people living in Ireland is an essential contributor to social cohesion," he said.
But we don't have a stable housing market. The lack of supply at a time of economic growth is driving already pent-up demand. As a result of the lack of supply, we don't have a functioning housing market as there isn't enough new stock to sate demand or allow those of a mindset to move or downsize to proceed with their plans.
The bottleneck is driving up house prices and therefore affordability, which refers to the proportion of household income spent on purchasing or renting accommodation.
The lack of movement into owned housing is also sustaining the pressure in the rental sector, which is obviously pushing up rents.
Today's EBS DKM Irish Housing Affordability Index notes that there has been "a definite deterioration in affordability" which has "become apparent across all regions of the State", while Dublin and the commuter belt are the least affordable areas.
Until the issue of supply is addressed, the level of affordability will not improve.