Yeah.

Yeah.

Um, and, and, and there is a few different examples, and, and I'd encourage if you're- if people are reading the book, is that y- it mightn't be Fiona and Tom in your case, but you'll know someone.

In fact, I had a, uh, Fiona, the, in the, in the book, they're in Newtownforbes in Longford, and I had a friend of mine, [laughs] after the book came out, texted me the next day and said, "The bit you wanna know is because her brother's just moved back in, age 38, with her parents in Newtownforbes." Um, uh, so, uh, it, we all know people, whether they've left the country because there aren't homes for them, or whether they're in with their parents or they're living with strangers, or they came to this country imagining one life and they're living a different one.

Um, there's the different examples, and each of them is, is k- showing of a different kind of failure in the system, and that's one of the bits in the book that I'm, I'm trying to get across.

Sometimes if we think the housing system's just broken and it's one big thing, how would you fix one big thing that's so big and so, um, it, it, it looms so large in our lives? Or is it, you know, a thousand different things? Where do you even start? But it's not.

Uh, the way I counted, we've got five distinct, even if they're overlapping, they're distinct issues, and by fixing those five, we can have a much healthier housing system.

Would you like to share with the listeners something about that one, please?

We're not headed there, you think?

Yeah, and that's, I, I, I guess there's a certain comfort, even if it sounds t- uh, ominous, in the, especially for those who don't yet own, there's a comfort in the idea that, "Well, if this is just the same as what happened 20 years ago, I'll sit, I'll wait it out, and eventually my time will come." But what happened 20-plus years ago was there was too much credit in the system.

So, uh, what, what's happening now is very different, and I, uh, in, at the start of the book, I kind of outline the, the, kind of the, the numbers that back that up.

That just because the housing system now is very unhealthy, it doesn't mean it's the, the same as the last time round.

And I think it's, it's, it's, that's a point that is important for those who make the decisions as well, the politicians and policymakers.

A lot of their, their, um, their, their mindset is based on basically face, fighting the last war.

That, uh, that we've got to make sure we don't have another bubble, and that's true.

... one in Dublin, absolutely loves it, but it was like winning the lottery.

We're not headed there, you think?

Yeah, and that's, I, I, I guess there's a certain comfort, even if it sounds t- uh, ominous, in the, especially for those who don't yet own, there's a comfort in the idea that, "Well, if this is just the same as what happened 20 years ago, I'll sit, I'll wait it out, and eventually my time will come." But what happened 20-plus years ago was there was too much credit in the system.

So, uh, what- what's happening now is very different, and I, uh, in, at the start of the book, I kind of outline the, the, kind of the, the numbers that back that up.

That just because the housing system now is very unhealthy, it doesn't mean it's the, the same as the last time round.

And I think it's, it's, it's, that's a point that is important for those who make the decisions as well, the politicians and policymakers.

A lot of their, their, um, their, their mindset is based on basically face, fighting the last war.

That, uh, that we've got to make sure we don't have another bubble, and that's true.

Friend of mine got into one in Dublin, absolutely loves it, but it was like winning the lottery.

How do you roll back on the cost? Because everything has just gone up and up and up and through the roof.

Yeah.

Uh, the, the, the solution here is not necessarily that the, the state or the taxpayer needs to keep spending more and more money on housing.

And just so, just so the listeners know, we've, we've gone from a housing budget of maybe 1.5 billion a year a few years ago.

Now, it's over 10 billion a year.

So it's not like the government doesn't put the money aside for this, um, and obviously as Ireland's in a, a lucky position that it's been able to put the money aside.

Lots of other countries don't have that, uh, you know, the tax revenues to be able to increase spending like that.

Yeah.

If it was possible for us to build, in the middle of the 2000s, 20 years ago, about 90,000 units per annum, how are we in a situation where we need to be able to be building 50 to 60,000 per annum at present, and we're actually s- barely getting to 40? If we were able to do it back then, why can't we do it now?

Well, so, um, w- we were doing it under false pretenses in the 2000s.

What happened was, and the middle bit of the book is how did we get here, uh, and, and one of the most important decisions for, in terms of consequences now that we're still suffering from, was when they took what had been initially successful tax reliefs in the 1980s, and they converted them into what are known, were known at the time as Section 23 reliefs, and there's a couple of other categories, but that was the main one.

What that did was it supercharged demand for construction, but there wasn't really the capacity, and the cost of building a home leapt up between '98 and 2000, and it never came back down.

And the reason it didn't hit or hurt the numbers of homes being built at the time was precisely because it was a tax relief.

It, to the person who was investing in those schemes, the cost of building actually went down, not up.

But once those schemes ended in 2008, all of a sudden we were left with this very high eye-watering cost of building a home, and the, the Irish housing system has never recovered from that.

That's changing, though, isn't it? Or is it changing sufficiently? And aren't there reasons as well not to have a permission free-for-all?

Uh, but your thesis In, in that respect is that this might not necessarily be a bubble in the dynamic proportions that we're used to thinking about it in.

That's right.

Yeah.

And, and hence the word brittle is-- It-- I, I think l-language and narrative, they're, they're really important.

We're not all data people.

Um, the words we use and the stories we tell are, are probably more important for, for what people can remember.

Like y-you say you, you remember Fiona, you might not remember the, the chart in the, in the [chuckles] chapter she's in, but you remember her.

Talk to us about how we actually got to this situation, because there's a few markers along the way going all the way through the history of the state.

But that the situation with housing in Ireland is really reshaping society and the ability of normal people in Ireland to make a life.

Yeah, we often, and I'm as guilty as anyone here, I've been writing the Daft Report for 20 years now, often we focus on prices, but really the focus needs to be on people.

And even the name itself, Brittle, the idea behind that was that...

We keep, I hear it all the time, people are worrying, is this just another version of a repeat of what happened 20 years ago? But there's more than one way that a housing system can become really unhealthy.

A bubble is just one.

So we needed a kind of a new word to describe it.

And the idea behind Brittle is that When the system needs to expand, a healthy one will expand to meet the new need, the new housing need.

And how, going forward, we are so far off addressing that.

But on a national scale, could this finally be a turning point or just a blip?

So obviously when you have just one report to go on, it's tough to say.

But I think when you connect up the various dots, if you mix an economist and a detective, you've got to look at is it supply or demand and start ruling them out.

The benign scenario would be that supply had improved enough that there was less upward pressure on prices.

But when you look at the numbers, it doesn't really stack up.

There hasn't been an improvement in the number of secondhand homes coming onto the market.

It's just that they're staying up there longer.

Should sellers now be wary of being overly ambitious when it comes to their property price and expecting a bidding war to rescue them?

What we've seen in Clare is inflation more or less holding steady, about 6% higher, prices 6% higher on average now compared to a year ago.

That's a little bit different to what's happening in some other parts of the country where we're seeing a slowdown in inflation.

That's the case in Galway, also the case in and around Dublin and Cork.

And that may be because we haven't seen the same rebounding availability.

What availability is, is the total number of homes on the market at any particular point in time.

In lots of parts of the country, we've seen that increase, albeit from low levels, over the last 12 months.

So steadily coming closer together all the time.

Yeah, that's right.

Is the market still very hot?

The issue with...

If you think about market heat as...

One way of measuring it is how much the initial listed price compares to the ultimate transaction price.

So in a hot market, somebody will be willing to bid a lot more than the initial listed price.

Six months ago, the average property was selling for about 6% or 7% more than the initial listed price, ultimately.

That has fallen quite a bit over the last six months.

Is that just everywhere outside of Dublin catching up a little bit?

What is it telling us, please?

Yeah, there had been a significant jump in rent in the open market in the first three months of the year tied to the change in rent control rules.

So under those new rules, when a tenant leaves, a landlord gets to now reset their rent to the market level.

That hadn't been the case before.

in rent pressure zones before but what it meant was that we saw the largest ever three-month increase in rents in this series it goes back over 25 years now um in the in the first quarter of the year a 4.4 percent increase in just three months in the second quarter between march and june we've seen an increase a further increase but a much smaller one 1.4 percent so That puts to bed at least one worry that the change in the rules would have maybe started a very different dynamic, that we would have seen much higher inflation for a prolonged period.

On average, that looks like it's not the case, that it's 1-0. of reset back to the market and it's the familiar story of a lack of supply still pulling up rents but pulling them up at a slower pace.

So it's still an unhealthy market in the sense there's not enough supply, not enough availability for those looking for somewhere to live and it's just not as chronic I suppose as it was in those first couple of months of the year.

What is the situation here in this county please?

Those factors are still there influencing tenancies.

Yeah, so the new rules are in, so new landlords will be able to reset to the market.

But it looks like, for example, if we take the case of Louth, it looks like the people listing in the second quarter of the year are just reaching the same level that those people in the first quarter of the year had already figured out.

So there was very little change in rents and Louths between the first and second quarters of the year.

The fundamental issue, we're taking a step back, is that there's a lack of homes available to rent all across the country.

And there are simply not enough homes on the market.

And that's what's pulling rents up.

What exactly are we looking at in terms of increases in Lowth and Meath?

Do we interpret that as a silver lining where we say there is rental parity is coming in across the board or do we take it as just the problem is spreading?

Unfortunately, it's more the latter than the former.

If you look at that Dublin versus, say, Donegal rent for a two-bed, yes, the gap is narrowing.

The differential has shrunk to its lowest level on record.

That might sound like a good news story, less concentration in Dublin, but if that were the case, in a good news story, we'd see Dublin coming down further.

to meet the Donegal rents or rents elsewhere in the country.

Instead, it's more the other way around, that the problem that had been concentrated in Dublin, Cork and Galway has now become a national-wide problem.

Do we have it now?

all in if you account for the kind of differences in property types.

On a like for like basis, prices in Clare are about 5.5% higher now than they were a year ago.

That puts Clare above the rate of inflation we're seeing in the cities, including in Limerick and Galway nearby, where prices are closer to stable.

In Limerick, they're only up 2% year on year.

But it's similar to many other parts of the country once you go outside the city.

So there's a sort of a two-tier or two-speed housing market at the moment.

I'm aware that this is beyond the scope of the report but could there be the possibility that people who are looking for a place in a larger city as you mentioned are perhaps choosing the likes of Clare as an alternative and working from home choosing it I suppose as their second option which pushes up demand within the county and makes it even less possible for those already residing in the county to purchase a home.

Absolutely.

And is that driven by demographics? Is that driven by a cultural shift in how people are working? Why the difference?

So the shift in how people work goes back longer than the last year or two.

If we take COVID as a starting point for changing a trend into a jump, there had been a sort of a slow trend towards more mobile working.

But as we all know, it's kind of leaped forward overnight in March 2020.

Since then, we've seen big increases, 70%, 80% in some parts of the country in prices in just six years.

but Dublin saw only a 30% increase in the same period.

So certainly there's a change in tastes.

What does that suggest in terms of the rate of supply? Is it getting anywhere near the level that will cause that to either arrest or reverse?

So there are signs, uh, Ronan, that the market is cooling, although perhaps the extent of that depends on where you are in the country.

That's right.

If you look at, say, Cork and Galway cities, uh, prices now are roughly in line with where they were a year ago.

Uh, whereas if you look at other parts of Munster or Connacht and Ulster, prices are still rising and maybe six, seven, eight percent a year, depending on the county, and really that comes back to the supply picture.

Secondhand supply in the cities is up significantly, 10, 15, 20%, depending on the market compared to this time a year ago, whereas out in, in, in parts of Munster and Connacht and Ulster, there's been no change from very low levels of supply, uh, a year ago.

So that's probably the single best predictor of what's happening-

Could this be the start of, of a downward trend in the capital?

Yeah.

Put those numbers into a historical context for us.

That's right.

And it should be said, these are rents in the open market as well.

Sitting tenants, especially those covered by rent controls, will have seen different increases.

But in the open market, over the last couple of years, rents increased by about 4% or 5% a year.

What we've seen is a 4.4% increase between December and March.

So roughly a year's worth of increases in the space of three months.

The picture then in Dublin versus the rest of the country, it's different.

So does that mean that we can read into this that it is a once-off reset and that through the rest of the year increases are likely to come back to normal rates? Or is it the start of a trend?

That's a really good question.

If I had to guess, I would say, maybe more than guess given my role, if I had to say which is more likely to be the case, I think it's more likely to be a one-off reset.

Now, the question is how long the reset lasts.

Is it going to be straight away or is it going to take the year for all of the landlords who want to reset to do so? I think it's more likely to be the former because what we saw in the six to nine months before the rules came into force.

So the government somewhat unusually announced the rules last June, but only implemented them in March.

And that's quite unusual across looking at other countries.

Could you expand a little on that, Ronan, in terms of the supply and demand picture and the direction of travel of that picture?

Mm.

So part of Ireland's problem, certainly, I'll speak more confidently about Ireland in this case, is, is that because it's an emergency, you tend to get too many solutions, right? Not, not necessarily the right solutions, you just ...

The politicians have to be seen to be doing something.

This is something, therefore we do this, right? And it's not actually taking a step back and going, "Well, what, what system do we wanna build? And that system, what does that healthy system look like?" Well, this will sound a little bit out of time, but bear with me.

Firstly, it's where supply responds to changes in demand, right? That sounds like the most Econ 101 thing you could say, but fundamentally, it's untrue in housing at the moment, right? That we have had phenomenal increases in housing demand or housing required in Ireland and across the high income world, and we haven't seen supply matching it.

Because once supply responds to changes in demand, then you get prices moving within a relatively narrow band relative to, to people's incomes.

It's affordable.

You know, we are talking about still a reasonably non-densely populated place in comparison to, let's say, our Dutch friends or our Belgian friends or for, or for, or our British friends, our English friends in particular.

That's right.

So from Ireland's perspective, it went from a country that was struggling to keep people to a country that was adding lots of people.

People were coming back initially, and then in two thousand and four, Ireland opened up to new EU member states, and population growth has really...

I mean, it's hard maybe for people outside Ireland to understand that you, you...

Country, like it doesn't really matter where you talk about in the twentieth century.

If you look, you're thinking about the Republic of Ireland, this is a country of three point one, three point two, maybe three point three million people, and now it's a country of five point three million people, and that's a big change, and that's a nineteen nineties change.

And at some point after nineteen ninety-two, when Ireland entered the single European market and found a business model for the first time in a hundred and fifty years that wasn't just exporting people, right? Um, it was now a, a hub for, in particular, North American businesses to have their European headquarters.

Yeah.

Explain to me why you use the word brittle, and then I wanna talk straight away about prices and rents.

Yeah.

I mean, David, you probably get this quite a bit as well, that when w- like, everyone cares, for obvious reasons, everyone cares about housing.

It's the single biggest expense we have.

This is pretty much true everywhere in the world, and for obvious reasons, you need somewhere to stay at nighttime.

Because everyone cares about housing, everyone cares about what, they might not call it the economics of housing, but that's ultimately, they're interested in the economics of, of housing.

So a question I get asked a lot, especially in, in Ireland, given what happened in Ireland in the, in the 2000s, is, you know, is this another bubble? If you see prices rising and rents rising for ten, twelve years, is this another bubble? And I'm using the word brittle to try and distinguish what we have now, not just in Ireland, but in, in, in lots of places around the world, from what happened twenty years ago, 'cause I do think, especially for policymakers, there's a tendency to fight the last war.

He's the Peter, the Peter Drucker of podcasting.

If they're slowing down now, does that mean that possibly the worst is behind us?

So the good version of this would be indeed that supply is improving.

We'll see a continued improvement in second-hand supply over the rest of this year and into next year.

That will take some more pressure off.

And with construction being at a higher rate than it has been in recent years, about 35,000 homes built last year compared to maybe closer to 30,000 for the previous few years, all of that will take some of the pressure off.

There's another version, of course, and it refers to something, a clip you just had on a few minutes ago, which is that we It may also see weaker demand.

If there's uncertainty in the macro economy, if employment is not as robust as it has been, Ireland has been a phenomenal job creator over the last few years.

You know, with your long term view on Ronan, there is the potential for another peak and trough on the roller coaster because of this.

So why are developers not flooding into the market to construct willy-nilly?

So what we have here, you've got to think of it from the supply point of view.

Supply doesn't happen when prices are high.

Supply happens when prices are high relative to cost.

And the fundamental issue here in Ireland at the moment, whether it's whether it's homes for rent or homes to buy, or indeed social housing, it's very expensive to build new homes.

And fundamentally, we have not been able to escape that over the last 10 or 12 years.

The closest we came actually was about 2018, 2019.

From your analysis, when do you see that supply and demand imbalance beginning to even out if things stay on our current tracks?

But also what's happening in the secondhand home market? Are we like to see any loosening or any kind of delivery there in terms of supply?

Yeah, I think in the second-hand market, it's important to distinguish between, at the moment, Dublin and the rest of the country.

In Dublin, the second-hand market is largely back to where it was pre-COVID.

Now, you could argue that that pre-COVID is not some sort of target, so that it was still a tight market.

But the Dublin market has largely recovered in terms of the amount of homes available to buy or the amount of homes being put up for sale.

But elsewhere in the country, It's still very much recovery from the COVID shock and the post-COVID shock in terms of demand for housing getting reallocated across the country.

There is a factor there in the second-hand market, which is around the interest rates having risen earlier in the decade.

If that continues in that direction, will that have an impact on house prices and on the housing market?

Ronan, will this new plan help supply more rental properties for the likes of Dennis and Sheila?

Well, it's a little bit of an unknown.

Obviously, we haven't seen the plan yet.

Unfortunately, the noises aren't good.

Like, if we look back over the last 10 years, there's been a lot of effort on the part of policymakers and politicians to try and address the growing problems in housing.

The first few years were dominated by encouraging home ownership.

And there's nothing wrong with that.

So all of the people who've been sharing their stories with us here on the show over the past three days, will there be some comfort for them tomorrow when this plan's announced?