Global House Prices: Dublin prices seriously unaffordable
An annual survey of house prices in several global locations has rated Dublin prices as seriously unaffordable while Limerick has the most affordable housing costs of all markets surveyed.
The 12th Annual Demographia International Housing Affordability Survey covers 367 metropolitan markets in nine countries (Australia, Canada, China, Ireland, Japan, New Zealand, Singapore, the United Kingdom and the United States). A total of 87 major metropolitan markets — with more than 1,000,000 population — are included, including five megacities (Tokyo-Yokohama, New York, Osaka-Kobe-Kyoto, Los Angeles, and London).
The survey, which is produced by Wendell Cox of Demographia, a US firm, and Hugh Pavletich of Performance Urban Planning, a New Zealand firm.
The metric used for affordability is the “Median Multiple” which relates the median house price to annual gross median household income.
The authors says:
Historically the Median Multiple has been remarkably similar in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States, with median house prices from 2.0 to 3.0 times median household incomes. However, in recent decades, house prices have been decoupled from this relationship in a number of markets, such as Vancouver, Sydney, San Francisco, London, Auckland and others. Without exception, these markets have severe land use restrictions (typically "urban containment" policies that severely ration land for development on the urban periphery) that have been associated with higher land prices and in consequence higher house prices (as basic economics would indicate, other things being equal).
The median is simply the mid-point where 50% of a sample or population is above and 50% below and it's more useful than the average which can be skewed by the distribution of expensive houses.
According to the latest official statistics, average Dublin house prices for new and second-hand houses in 2007 and 2014 were at €416,000, €496,000 and €342,000 and €326,000 respectively.
There is no official Irish data on median house prices and for a new house in Dublin in 2014 purchased by a couple on the median wage of €28,500 (€57,000 in total), the ratio would be 6 according to our calculation.
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According to the survey, Ireland had a seriously unaffordable major market (Dublin) Median Multiple of 4.5 in September 2015. Ireland’s overall Median Multiple is an “affordable” 2.8, the best in the survey for the third year in a row. With the exception of Cork (3.3), all of the other markets were rated affordable, with Median Multiples of 3.0 or less (Galway, Limerick and Waterford). Limerick had the best housing affordability among the surveyed nations, with a Median Multiple of 1.8.
In 2007, the Median Multiple is 8.5 in Sydney, 8.3 in London, 7.7 in Vancouver, and 6.9 in Auckland. All of the 25 least affordable markets are rated “severely unaffordable”. Ireland’s only surveyed market, Dublin was rated severely unaffordable, at 5.7.
Median prices in 2015 were 19 times median annual gross household income in Hong Kong followed by Sydney, with a median multiple of 12.2.Vancouver was the third least affordable major market, with a Median Multiple of 10.8. Auckland, Melbourne and San Jose all had Median Multiples of 9.7.
They were followed by San Francisco at 9.4, and London (Greater London Authority), at 8.5. Two other markets had Median Multiples of 8.0 or above, including San Diego and Los Angeles, both at 8.1.