Myhome.ie estimates that the average asking price is now €412,000 in Dublin and €254,000 in the rest of the country. At those prices home ownership is an unaffordable dream for the vast majority of young people, even those in what were traditionally considered to be “good” jobs such as teachers, civil servants, guards, nurses, etc.

The latest surge means that average new house and apartment prices have now risen by 75pc since their 2013 trough while the price of existing homes is up 90pc over the same period.

At the heart of the housing crisis is a lack of supply. After peaking at an incredible 93,000 units in 2006 new housing construction collapsed after 2008, dropping as low as 4,600 in 2013. While there was a gradual recovery in the years that followed, with over 21,000 units being completed in 2019, new housing construction still seriously lags underlying demand.

By how much is a matter of debate. In a report published last December, the ESRI estimated that we would need to build 28,000 houses a year out to 2040 to keep with population growth.

When the pandemic first struck in March 2020 the entire construction industry shut down and there were fears that the increase in new housebuilding experienced since 2013 would be reversed. These fears proved exaggerated. The construction industry was one of the first sectors to reopen and almost 20,500 units were completed, down less than 500 on the 2019 figure. Davy economist Conall Mac Coille expects a further 21,000 units to be completed this year. 

On the face of it the CSO figures would seem to indicate that Covid-19 did little more than knock new housebuilding output sideways.

Of course, what the CSO figures don’t capture is the huge backlog in demand that has accumulated due to the extremely low levels of new housebuilding for most of the past decade. Less than 113,000 houses and apartments were built during the entire decade from 2011 to 2020 while the population is growing strongly, up by 240,000 in the last five years alone.

In a report published last month, Davy estimated that up to 200,000 new houses and apartments would need to be built over the next three years to meet what Mac Coille describes as the “latent” demand for housing.

Meanwhile, daft.ie’s Ronan Lyons reckons that new housing output needs to rise to 50,000 a year to meet demand.

However, while inadequate levels of new housing output are certainly a large part of the problem, they are by no means the only culprit.

“While construction remains woefully inadequate compared to the true level of housing need in Ireland …. It can’t explain the spike in prices over the last year,” says Lyons.

No, it’s not the lack of new houses but the absence of second-hand houses coming onto the market, that explains the price explosion over the past 12 months.

Both the myhome.ie and daft.ie reports tell the same story with myhome.ie stating that there are 12,700 second-hand homes for sale at the end of last month while daft.ie puts the figure even lower at just 12,500. This compares to the 22,600 second-hand homes myhome.ie had listed as being for sale at the end of June 2019.

According to the 2016 census, there are just over two million houses in Ireland. What this means is that, even before the pandemic, very few second-hand houses were coming on the market. In 2019, the last year before Covid-19 struck, just 36,600 second hand-houses were sold to market buyers, ie after excluding inheritances, transfers between family members and other non-market transactions.

The number fell even further, to just 30,700, last year.

Based on 2019 transaction volumes, the average Irish second-hand house could expect to change hands once every 55 years while the average gap between sales would have risen to 65 years based on 2020 transaction levels.

Even if one discounts the 2020 transaction figures as having been skewed by Covid-19, it is clear that the second-hand housing market was already deeply dysfunctional. The pandemic, by boosting savings, has fuelled a further increase in demand at the same time as supply fell even further, causing the second-hand market to seize up completely. 

There are a few strands of good news. While the number of properties listed for sale at the end of June was extraordinarily low, it was still up considerably on the 10,900 that myhome.ie had listed for sale at the end of March. Will the gradual reopening of the economy – last week’s indoor dining hiccup notwithstanding – lead to an increase to more “normal” levels?

Even if it does more, much more needs to be done. The shortage of second-hand houses being offered for sale and the low levels of new houses and apartments being built are of course interconnected. There is a chronic lack of homes suitable for “empty nesters” trading down from larger homes – decent-sized apartments with ample storage and parking rather than the shoeboxes so beloved of most Irish developers.

Changes in fiscal policy could also end up increasing the supply of second-hand homes being offered for sale. One of the permanent effects of Covid-19 is likely to be a permanent reduction in the amount of commercial rates being paid by the retail and hospitality sectors. How will that shortfall be made up?

While the Government is desperate not to increase the residential property tax paid by householders, it may end up having little choice. To see where we might be headed in the medium term one need only look to Northern Ireland, where the average annual rates bill is now £984 (€1,141) for homeowners or to England where council tax averages £1,818  a year.

If residential property tax bills in this country were ever to approach these levels, then the shortage of second-hand houses being offered for sale could disappear very quickly.