Finfacts have a short article up today discussing the Demographica International Housing Affordability Survey for 2011. The survey compares 325 urban housing markets in eight countries. The five locations reported in Ireland are Dublin, Limerick, Galway, Cork and Waterford. The survey uses a median multiple to determine housing affordability, basically dividing median house price with median gross (before tax) household income. A median multiplier score less than 3 is considered affordable; between 3.1-4 is moderately unaffordable 4.1-5.0 is seriously unaffordable; 5.1 and over is severely unaffordable. The report concludes that Ireland’s housing market is either affordable (Galway and Waterford) or moderately unaffordable (Dublin, Cork and Limerick) and that house prices have almost fallen to normal affordability nationwide (see table below). On their data and this measure as Finfacts note: ‘For the first time, Ireland has no seriously unaffordable and no severely unaffordable markets.’
Ireland housing affordability
It is clear that Irish house prices have fallen dramatically over the past four years, decreasing by 46% nationally and 54% in Dublin according to the CSO. There is no doubt then that houses are becoming more affordable in comparison to median household income (which has not fallen to the same degree). Nevertheless in the case of Irish data, it would be really useful to be able to see the exact source of the median house price data used given the absence of detailed property price register and various estimates of present house prices (DECLG, CSO and Daft.ie are listed at the end of the report). DECLG reports that average new houses for Q4 2010 (the last reported data) as €238,551 and for secondhand houses as €349,393; for Q4 2011 Daft.ie has average asking prices as 159K for the inner city, 211K for north city, 217K for south city; €215K for north Dublin county; €177K for west Dublin county; and €322K for south Dublin county – all but two areas are above the median Demographica house price of €178,000 for Dublin as a whole. These sources though seem to be using averages rather than medians. The household income seems to tally with SILC data for 2010, though that provides a national snapshot and is not disaggregated to cities.
The extent to which Dublin, Cork, Galway, Limerick and Waterford are now considered affordable, or indeed some of the most affordable cities outside of the US in the 8 countries surveyed, might seem fanciful to many. There’s no doubt that housing has, however, become a lot more affordable in recent years given the extensive drop in prices, and Demographica’s data reflects this. The data suggest though that there is still a little way for prices to fall before all areas become classed as ‘affordable’, but that an idealised bottom may not be too far off (assuming median incomes hold up and that Demographica’s data is a true reflection of median house prices). The extent to which the wider public agrees with such sentiment and how access to credit, weak demand and oversupply plays out will probably determine where prices level off.
Rob Kitchin
Ireland after NAMA 
January 24, 2012 at 9:11 am
Why is a multiplier score of 3.0 accepted as the mean for determining affordability? Why not 2.5 or 4.0?
February 1, 2014 at 5:49 pm
Three times a families gross income was/is the magic median number used for the average 3 bdrm house for years. Similarly, 10 times the gross revenue of a rental property is used as a buying guide. If you go beyond that (higher) you risk hindering yourself on a personal mortgage or being unable to sustain a rental property with say one third of the units empty.
This has long been a tool used in North America based on estimates of income after taxes per gross family income. As people in Ireland and Europe are taxed incredibly more, the magic numbers don’t necessarily apply and probably should be lower. 2.5 or less maybe a better scale for residential. Remember, it is household income that is used not individual.
January 24, 2012 at 1:19 pm
You would need to direct this question to Demographica to get their opinion with regards to their own work. My guess though is that they would tell you that a multiplier of 3 is a general banking/property standard for judging affordability in terms of the amount of proportional income that is being spent on a home. Once you go above 3, more household income is being spent on housing, reducing income for other essential and optional services.
January 24, 2012 at 3:04 pm
Hi Rob, thanks for that and the links in particular.
The Permanent TSB/ESRI used to publish average prices with now discontinued house price series. At the peak, the Dublin average was €431,106 and if you were to apply the Dublin fall from peak according to the CSO series, the average price today would be €194,518.
It seems likely that property has become more affordable but I far prefer the DKM/EBS surveys of affordability which look at after tax earnings.
Also regardless of how affordable a property is, who wants to buy an average €165k property which is still falling by nearly 2% per month. If affordability is an economic metric to help buying decisions, then surely declines in value is generally just as valid as an economic metric.