Average rents in the State have increased by more than 82 per cent in the past 12 years, the third-highest increase in the European Union.
The average increase across the EU between 2010 and the second quarter of this year was 18 per cent, according to figures by Eurostat contained in the latest housing market monitor published by the Banking & Payments Federation Ireland (BPFI).
Analysis in the monitor report concluded that housing supply would have to increase substantially to affect soaring prices.
The monitor shows that there was “significant” growth in mortgage drawdown values this year – the highest value for the July-September period since 2008.
In the 12 months to September, more than 50,000 mortgages valued over €13 billion were drawn down, an increase of 18 per cent in volume and 30 per cent in value compared with the previous 12-month period.
“The fall in the purchasing power of households caused by higher housing and general living costs as well as the future uncertainty in the wider economy are likely to affect mortgage demand in the short term,” BPFI’s chief economist Dr Ali Ugur said.
“However, the significant gap between average rents and average mortgage payments in Ireland, coupled with significant latent demand, are likely to balance any negative impact on demand for mortgage lending in the short term which can continue to impact housing costs unless supply increases substantially.”
BPFI chief executive Brian Hayes noted the “stark” increase in rents and “significant gap” between average rents and mortgage payments.
“The average first time buyer monthly mortgage payment was just over €1,000 during the first half of 2021 compared with the average monthly rent of over €1,400 at the national level, with the gap being significantly higher in Dublin,” he said.
“We have seen significant price inflation globally and mainly in advanced economies, particularly since the start of the pandemic.
“However, we can see that prices are rising faster in Ireland than in the EU average.
“This is particularly stark in terms of rental prices with the latest Eurostat data showing that average rents have increased by over 82 per cent in Ireland between 2010 and Q2 2022, the third-highest increase in the EU, whereas the increase in average rents during the same period in the EU was 18 per cent.
“In terms of house prices, the increase was nearly 50 per cent in the EU during the same period with average prices increasing by over 55 per cent in Ireland.”
The report also found that between 2011 and 2022, the population in Ireland increased by over half a million people while housing output grew by 130,000 units.
Compared with pre-Covid figures, housing starts in the first nine months of 2022 were 5.4 per cent higher than in the same period of 2019 – but this activity appears to be declining, the report said.
On an annualised basis, around 27,400 units were started in the twelve months to September 2022.
The monitor report noted that there was a further decline in annual commencement levels in October.
“Commencement figures of new housing in the first nine months of 2022 were 5.4 per cent higher than in the same period of 2019,” Mr Hayes said.
“However, we see that the commencement activity seems to be declining on an annual rolling basis after peaking at 35,000 units during the first quarter of 2022 to some 26,600 units in October 2022.
“Meanwhile, in terms of population growth, the latest Census figures from the CSO (Central Statistics Office) show that, between 2016 and 2022, the housing stock increased by over 120,000 whereas population growth during the same period was over 360,000.
“More significantly, between 2011 and 2022, the population in Ireland increased by over half a million people whereas housing output grew by only 130,000 units.”
*This article was amended on at 4.30pm on Tuesday, December 6th to correct a percentage figure.