Ireland moves to the wrong end of the housing affordability league.

The IAVI, Ireland's leading property body, has commented on an international report prepared by brokers Dresdner Kleinwort Benson which indicates that Ireland has moved to the wrong end of the housing affordability league.

According to the DKB report, within Europe Ireland is second only to the Netherlands in terms of the ratio of average disposable income to the cost of an average urban home.

Currently, according to DKB, the average urban home in Ireland pegs in at 18.2 times average disposable income. This compares to a figure of 19.1 in the Netherlands with only Japan, of those countries surveyed, coming in higher at 26.1. Current ratios for the U.K. and Germany are 12.7 and 15.9 respectively.

These 1999 figures show changes all round from 1989 levels, although not as dramatic as might have been anticipated in some areas. The ratio in Ireland for 1989 was 11.3, suggesting a disimprovement of 61% in the affordability ratio over ten years. The Japanese ratio, at 26.1, shows a very dramatic reduction from the frighteningly high 1989 figure of 67.4 for that country.

Within the EU as a whole, affordability has not altered dramatically over the ten years, with the ratio dropping from 15.6 to just 14.7 from 1989 to 1999.

Of the 14 countries surveyed, including Japan and USA, affordability improved in 9 and worsened in 5. The United States dropped from a ratio of 9.7 to 8.3, good news for the 720,000 National Association of Realtors.

Commenting on the DKB report, IAVI chief executive Alan Cooke said the IAVI wondered how DKB arrived at their precise figures. There is no doubting that affordability has worsened in Ireland from 1989 to 1999 but official figures conflict somewhat with the DKB findings and suggest that DKB are using previously unpublished data.

The average industrial wage in Ireland at the end of 1998 was IR£15,600 per annum. At the end of that year the average price of a new home in Ireland was IR£106,514 (6.83 times the average wage) while the average second-hand home in Ireland was valued at IR£116,403 (7.46 times the average wage). The average ratio of gross earnings to prices nationally therefore averages out at 7.15.

In this light the ratio of 18.2:1 suggested by DKB for Ireland suggests an effective tax rate on income of about 60% in this country. No one in Ireland is paying tax at a marginal rate higher than 48.5% and as this is the top marginal rate the average tax rate is considerable lower, perhaps in the range of 30-35%.

Even if one takes the highest average regional house price in Ireland (Dublin second-hand at IR£148,745) the ratio to average earnings pegs in at 9.54 suggesting, according to DKB, an average effective tax equal to the top marginal rate which cannot be the case.

This calls into question, according to the IAVI, what exactly DKB define as "net disposable personal income".

"Prices for houses in Dublin, Ireland's capital, have gone up by close to 65% in the last two years alone, while wage costs have not been increasing at anything like the same rate. A change for Ireland is not therefore surprising. We would like to see clarification of DKB's sources and data before accepting that an effective ratio of 18.2 exists in Ireland between net income and average urban house prices" said Alan Cooke, CEO (Executive Vice President) of the Irish Auctioneers & Valuers Institute, Ireland's largest representative body for the real estate profession.

New Workers Sought 

The IAVI also believes that Irish Government Departments may be contributing to the housing crisis in urban Ireland. The effective Irish unemployment rate has, by common consensus, bottomed out, leaving just a little over the hard core of unemployable on the live register. This is a direct consequence of the booming Irish economy and sustained record growth in both GNP and GDP.

But there are still good quality jobs to fill in the IT and Call Centre sectors, particularly for those with relevant qualifications and preferably experience and a foreign language (sorry, American English doesn't count). This has led Ireland's Department of Enterprise & Employment to launch a major campaign abroad, which started at the recent German Jobs Fair, to bring 10,000 extra workers to Ireland.

These 10,000 individuals will comprise, it is expected, about 80% Irish nationals returning from overseas experience and about 20% non-nationals.

The IAVI points out that net immigration is already a serious factor in the Irish economy and, more particularly, its Housing Market. The Bacon & Associates studies of Ireland's housing difficulties identified the turn around from substantial historical net emigration to substantial net immigration as a major contributing factor in pushing up Irish house prices, particularly in major urban areas.

At a time when the housing crisis shows some signs of alleviating, but has by no means been solved, the wisdom of inviting an additional 10,000 people, presumably some at least of whom will have dependants, into Ireland's housing market, must be questionable.

"There are conflicting needs competing here. Obviously to continue its well established expansionist trend, the Irish economy must be able to fill high level job vacancies. However, the knock-on effect of creating a new demand for an additional 10,000 housing units (the level of newly built housing units in Dublin would approximate to this figure annually) is open to question", says Alan Cooke.

Latest Price Rises

Meanwhile, the Irish Department of the Environment and Local Government has just (8th June 1999) released the official house price levels for the first quarter of 1999.

These indicate a national average for new homes of IR£111,429 (up 4.6% in the quarter, compared to 9.1% the previous quarter and up 21.7% on an annual basis, compared to 23.3% in the year to the last quarter of 1998).

The average Dublin new home cost IR£141,897 (up 6.7% in the quarter, compared to 4.6% in the previous quarter, with the annual increase also up marginally quarter on quarter from 25.8% in the last quarter of '98 to 26.2% in the first quarter of '99).

With second-hand properties, the national average was IR£120,406 (up 3.4% in the quarter, compared to 5.5% in the previous quarter, with the annual rate of increase rising marginally from 29.2% to 31% from the year to December to the year to March).

Finally, Dublin second-hand homes averaged IR£150,533 in the first quarter of 1999 (an increase of just 1.2% in the first quarter compared to 0.8% the previous quarter, with the annual rate of increase effectively unchanged at 27.3%, compared to 27.4% in the year to December).

The above information and views have been prepared for this site by the IAVI, by far Ireland's largest Real Estate body.

They are located at 38 Merrion Square, Dublin 2, Ireland, telephone Int + 353 1 661 1794 Fax Int + 353 1 661 1797 or Email at info@iavi.ie. Their web site is well worth a visit and contains useful information for those planning to buy property in Ireland, as well as listing a wide range of available properties. It is at www.iavi.ie

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