The extremely tight housing market in Ireland is becoming the decisive test for the government of Leo Varadkar, who recently took over as prime minister in the grand coalition.

The prices for houses and apartments on the island have risen more in 2022 than they have in a long time.

Philip Pickert

Business correspondent based in London.

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Residential property is now around 10 per cent more than a year ago, and in parts of western Ireland as much as 16 per cent more, according to the CSO.

The CSO calculates that house prices have more than doubled in a decade.

Rents have risen even more this year, up 14 percent on the national average, according to real estate website Daft.

"I've never seen a rental housing market as tight as Ireland's now," says Dan O'Brien, chief economist at the Institute of International and European Affairs in Dublin.

Strong immigration

In part, this is also a result of Ireland's success in the tech industry, with high-paying jobs that have attracted many foreign workers.

In addition, more than 60,000 Ukrainian refugees came to Ireland last year because of the war.

This is the first time since 1841 that the population in the territory of the republic has risen to over 5.1 million.

Homelessness has also increased, particularly in Dublin.

Officially, 12,000 people are registered as homeless, and many more are staying with their parents.

The situation is tense, but not just since this recent wave of influx.

"We have a chronic housing shortage," says Conor O'Toole, a housing specialist at ESRI.

At least 35,000 houses would have to be built every year.

In fact, no more than 28,000 residential units were completed this year, which is 20 percent fewer.

Not enough has been built since the real estate bubble burst

The state multi-billion dollar house construction plan "Housing for All" with expansion targets up to 2030, which was presented in 2021, did little to change this.

Since the great real estate and financial crisis more than a decade ago, when the house construction boom collapsed completely, far too few new houses have been built.

More and more young people are now thinking of emigrating because they can no longer stand the high prices in Ireland and have little hope of buying real estate.

The situation is considered to be one of the main challenges for the government of Varadkar, who changed posts with the previous Prime Minister Micheál Martin shortly before Christmas and is now Prime Minister again.

Varadkar has made housing policy his priority and aims to surpass housing targets by 2023, he told RTE.

The opposition left-republican Sinn Féin led by party leader Mary Lou McDonald is benefiting from the dissatisfaction with the situation.

Varadkar's party, Fine Gael, however, warned that such price controls would deter investors and result in fewer new builds.