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How has the financial crash of 2008 affected Housing Affordability for First Time Buyers?

Mullen, Barry (2019) How has the financial crash of 2008 affected Housing Affordability for First Time Buyers? Undergraduate thesis, Dublin, National College of Ireland.

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Abstract

October 4th, 2018 was a typical cold, wet and windy day in Ireland, but it would also prove to be a significant day in Irish history, the Dail (National Parliament of Ireland) finally accepted that housing and homelessness in Ireland had become a national emergency (Socialjustice.ie, 2018). Housing plays such a critical part in society and if the market is not managed correctly it can be the source of crisis, which was the case in Ireland in 2007/2008. A good stable housing market is vital for any country as it can help steady an economy, it can also help a country recover from economic shocks such as the financial crash. After the housing bubble burst in 2007, Ireland and most of the world, went into a recession in early 2008. This was devastating for people in Ireland as the prospect of owning a home presents a great opportunity for households to build up their wealth. Home ownership in Ireland had always been high and reached a peak of 80% of households being homeowners in 1991.

Before, during and after the financial crash, the Irish housing market experienced some extreme peaks and troughs. Before the financial crash in 2008, Ireland was on the cusp of a wave coming from the Celtic tiger era. Unemployment was at an all-time low (see figure 1), Gross Domestic Product per capita was slightly above $61,000 and many households were availing of 100% mortgages from banks and lending societies. However, it is fair to say that this was too good to last. In 2007, the housing bubble burst and in early 2008 Ireland went into a deep recession, where almost overnight the Irish housing market collapsed. In the months to follow the recession, housing prices started to decline and at the lowest point in the recession some housing prices dropped by a massive 50% or more.

Fast forward to 2019 and the reality is that Ireland has recovered from the housing bubble busting and recession quicker that first anticipated. In 2013, housing prices started to increase, and unemployment started to slowly decline. From 2013 until the beginning of 2019 the average house price has increased by 34% and the unemployment rate had dropped to 5.4%. This is the lowest rate since the beginning of 2008, just before the recession (Tradingeconomics.com, 2019). These figures indicate that the economy is doing well, and the demand for housing has increased steadily over the last six years. As a result of the faster than expected recovery from the recession, the housing market has once again began to boom. Currently (2019) in Ireland the demand for housing far outweighs the supply and this has resulted in a sever housing crisis. Over a period of 12 years (2007-2019) Ireland has gone through some extreme economic events (i.e. housing market collapsing, 2007; a financial recession, 2008; and housing crisis 2019).

The main aim of this research was to investigate “How the financial crash of 2008 has altered the affordability of housing in Dublin for First-Time Buyers?”. It has been over a decade since the global financial crash of 2008 and Ireland is experiencing one of the worst housing crisis in its history. There were several areas that were impacted by the financial crash, resulting in unaffordable housing. For example, the supply of housing diminished, the construction industry collapsed, the banking sector tightened their lending policies and certain households struggle to obtain a mortgage. All of these areas were investigated in this research to determine whether there is a correlation between the financial crash in 2008 and the current housing crisis. The aim of this research paper was to prove that due to the financial crash, housing has become unaffordable for First-Time Buyers (FTB) living in Dublin. Furthermore, the aim was to investigate whether the financial crash has had a knock-on effect on all the areas mentioned above, thus resulting in housing prices being unaffordable for FTB.

Item Type: Thesis (Undergraduate)
Subjects: H Social Sciences > HC Economic History and Conditions > Economic Recession
H Social Sciences > HD Industries. Land use. Labor > Housing
Divisions: School of Business > BA (Honours) in Business Studies
Depositing User: CAOIMHE NI MHAICIN
Date Deposited: 14 Oct 2019 15:30
Last Modified: 14 Oct 2019 15:30
URI: http://norma.ncirl.ie/id/eprint/3878

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