City-centre rents and house prices are increasingly out of reach for those on average wages. As well as causing big problems for those directly affected, particularly younger employees and those returning to Ireland or coming to live here, this is also having a wider impact on the jobs market. But recent data suggests that job numbers continued to rise quickly in the capital over the past year. How is this happening, when those taking up many of the jobs can't afford to live anywhere near the city centre? Here are the three key points.
1. Jobs growth is starting to slow
The Irish jobs market has performed remarkably in recent years, with total employment now exceeding the pre-crash peak and a net gain of 66,700 jobs over the past year, or not far off 1,300 a week. However there are signs that growth is slowing, with the quarterly rate of increase slipping each quarter from the start of the year.In the last quarter the increase was 10,700, or just over 800 a week. It is the slowest quarterly rate of increase since nearly 2017.
How much of this is due to the housing shortage? It’s impossible to know for sure, but not surprisingly employers are screaming about two things – skills shortages and the cost of housing – as limiting their ability to attract new hires. This in turn is contributing to upward pressure on wages both for new hires and existing employees – very evident in parts of the tech sector, for example.
Ireland's jobs growth is still impressive, but Simon Barry, chief economist at Ulster Bank, says we may be seeing the end of the "bounce-back recovery phase", where spare capacity in the economy and a recovery from the depths of the recession led to very rapid growth. Typically the economic cycle would slow as rising costs and wages hit competitiveness and unemployment falls to a low level. In Ireland, the housing crisis gives another twist to this normal cycle, as it is the clearest hit on people's living standards and a block to getting more people to live and work in the major cities and particularly Dublin.
The cohort of people priced out of the housing market – either buying or renting in the major cities is rising. This means signs of stabilisation – or even falling asking prices in some parts of the Dublin market are good news, as is the gradual increase in supply from new homes and those going on the market. But the market remains dysfunctional and rents continue to soar, with Ronan Lyons of Daft recently calculating that the average supply of monthly rental properties is only a third of estimated demand.
Recruiters say that the crisis is pushing out commute times for many – as they are forced to buy further away from their work – and making it harder for companies to retain staff, many of whom would settle for a lower-paid post nearer home.
As well as being a factor for jobs in fast-growing sectors like tech, housing availability is also a block to attracting higher-paid financial professionals locating here due to Brexit, with a shortage in the availability and high prices for larger properties, too.
2. Despite high house prices, jobs growth in Dublin is still above the average
On the face of it, jobs growth in Dublin remains well above the norm, with the capital adding almost 33,000 jobs over the past year – half of all the jobs created and a growth rate of 5 per cent, compared to the average rise of 3 per cent. To underline the point, the annual rate of jobs growth in Dublin in the third quarter of this year was twice what it was one year earlier. Some other regions are doing well, notably the South and the Midlands, but elsewhere gains are smaller and job numbers in the Border region have fallen over the past year, a worrying sign as this would be the area worst hit by a harder version of Brexit.
So how does this square with the house price story? Clearly Dublin employers are still finding it possible to recruit and their employees are still finding somewhere to live. Is momentum just so strong that it is overcoming the housing issue? Brexit has been a big factor in recent months, according to Trayc Keevans, foreign direct investment director at Morgan McKinley, with an inflow in finance and some other sectors, as companies finally decide they can’t wait any longer to set up a base within the EU. This means the professional jobs market is booming.
Perhaps there is one straw in the wind in the quarterly figures, though caution is needed here as the regional breakdowns do jump about from one quarter to the next. The rise in employment in Dublin in the third quarter was just 1,100, a sharp slowdown from previous quarters and compared to a 14,000 rise in the same quarter last year. Are housing costs finally starting to bite? Or is this just a blip? This will be interesting to watch in future figures.
Interestingly, recruiters say that high house prices in Dublin are now making companies in some sectors, notably parts of the tech industry, much more willing to consider locations outside Dublin. Keevans pointed to announcements this year for Sligo as just one example of this. A US software company LiveTiles set up an innovation centre there, for example, and US e-commerce company Overstock recently announced a 1000-job expansion there. Affordable living and quick commutes are a key selling point as firms like this seek to attract skilled employees.
3. The jobs market now relies on immigration for growth. But where will they all live?
The rise in inward migration has been extraordinary over the past few years, showing the flexibility of the Irish jobs market and allowing some sectors - notably construction – to expand much more rapidly than otherwise.
Four out of every 10 jobs filled over the past year were filled by non-nationals, according to the jobs data. Of course we don't know that they all came to Ireland over the past year – some may already have been living here. But it is a fair assumption that many did, with other CSO figures show large numbers now coming here from countries including Italy, Romania, Span, African countries and Brazil.
But where are they all living? And will high housing costs cut immigration and thus the growth in the jobs market? Dr John McCartney, head of research at Savills takes a somewhat sanguine view, pointing to data from the Dublin Housing Supply Coordination Taskforce – incorporating the four local authorities – showing rising supply. House price growth in Dublin has slowed sharply, he points out and there are also signs of an increase in apartment supply. There were 36.9 per cent more units with planning consent in the second quarter of this year than there were a year earlier, he pointed out. “Units are being completed,” he said, “but not yet as many as we need.” He is confident that in time new planning approvals will turn into the extra apartments we need.
The pace at which planning approvals turn into new apartments will also be closely watched, with speculation of some change in planning rules possibly holding back development in some cases. Finance can also be an issue for apartment developments, with large up-front costs and –unlike a housing estate –an in ability to phase development as each block has to be completed as a unit.
Construction employment is soaring, up nearly 14 per cent over the past year, or some 18,000 jobs. However a study by ESRI economist Kieran McQuinn this week pointed out that at 6.4 per cent, the total amount of the workforce employed in the sector here was below the EU average of 6.7 per cent – and remember Ireland has a particular need to build housing and infrastructure after the crash. With unemployment low, McQuinn says “if housing construction rates are set to increase, net inward migration will be an important source of labour.” However the catch-22 is that “ the existing high cost of accommodation may prevent the workers we require to address the housing supply shortage from actually coming to live and work here.” And in turn, a failure to build these houses would have wider economic implications, hitting jobs growth across the economy.
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The bottom line is that if the housing shortage – as well as its social consequences – now stands as a threat to wider growth in the jobs market and the economy. The last 18 months or so have seen a tipping point in affordability for many in terms of rents and house prices and meant that firms offering decent wages of €50,000 to €60,000 have employees struggling to find a place to live.
The Government’s solution, more building in denser developments close to city centres involves a change in planning and also a change in living practices. Traditionally, people with children have chosen the space of a house, rather than an apartment, where possible. If this is to change, bigger apartments and attractive living areas and public transport will be vital in major cities.
In the meantime, it is worth watching the jobs market in Dublin. The huge momentum of the past year seems to have stalled in the last quarter. But is this just a blip, or something more fundamental caused by the fact that people on average earnings – even couples with joint incomes of over €100,000 – simply can’t find an affordable place to buy or rent anywhere near the city centre?
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