Property insights by Johnny Gannon, Fair Deal Property Galway Auctioneers & Estate Agents.
Much of the commentary around global conflict understandably focuses on geopolitics, energy markets, and international stability.
But from a property market perspective, the real impact is far more direct, and far more immediate.
Because while wars are fought far from Ireland’s shores, their consequences are felt very quickly on building sites across the country.
And right now, there is a growing concern that the latest escalation in the Middle East could deepen one of Ireland’s most persistent problems; insufficient housing supply.
At Fair Deal Property, we speak with developers on a daily basis. These are experienced operators who have already endured one of the most challenging periods in modern construction history.
Post-Covid, the industry was hit with a perfect storm of material inflation, labour shortages, and supply chain disruption. Costs rose sharply and, in many cases, unpredictably.
Projects that were viable on paper became marginal. Marginal projects became unviable. And in some cases, developments simply didn’t proceed at all.
Developers became more cautious, more forensic in their approach, and far less willing to take on risk without clear certainty on costs and timelines.
Now, just as some level of stability had begun to return, there is a real risk that inflationary pressure begins to build again.
And construction is particularly exposed.
Rising energy costs feed directly into the price of materials. Transport becomes more expensive. Labour costs come under renewed pressure.
In addition to this, financing costs remain elevated, and when you combine higher build costs with higher borrowing costs, the margin for error becomes extremely tight. This is where projects quietly fall away before they ever reach site.
It doesn’t take a dramatic shift to alter the viability of a housing scheme. In many cases, a relatively modest increase in costs is enough to push a project from feasible to stalled.
This is the critical point that often gets overlooked in broader discussions about housing supply.
Developers do not build solely to satisfy need. They build based on viability.
If the numbers don’t work, the homes don’t get built.
And this is where global inflation becomes a local housing issue.
Because if costs rise again, output doesn’t just slow, it contracts.
Fewer schemes commence. Fewer units are delivered. And the supply shortage becomes even more pronounced.
At the same time, there is a second layer to this.
Affordability.
As inflation rises, so too does the cost of living. Energy bills increase, transport costs increase, general household expenses increase.
And for buyers, that creates a squeeze.
Even if demand remains strong in principle, the ability to act is constrained. Borrowing capacity becomes tighter, monthly repayments feel heavier, decisions are delayed.
There is also a psychological element at play. When households feel financially stretched or uncertain about the future, they naturally become more cautious, and that caution feeds directly into reduced transaction activity.
So what you are left with is a market under pressure from both sides.
On one hand, supply is being restricted by rising construction costs.
On the other, demand is being softened, not by lack of interest, but by reduced affordability.
Ordinarily, that combination might suggest downward pressure on prices.
But Ireland is not an ordinary market.
We are starting from a position of structural undersupply. There are simply not enough homes relative to the level of demand.
And in that environment, reduced output tends to have a stronger impact than reduced demand.
Which leads to a somewhat counterintuitive outcome.
Global instability does not necessarily lead to falling house prices.
In fact, it can contribute to the opposite.
Because when it becomes harder to build, existing housing becomes more valuable.
For Galway and the wider region, this is the key takeaway.
The housing market is not operating in isolation. It is part of a broader economic system, and it is highly sensitive to global cost pressures.
The risk is not that demand disappears.
The risk is that supply falls even further behind.
And if that happens, the gap between the numbers of homes we need and the number of homes we deliver will continue to widen.
In that event there will be no relief for beleaguered house buyers as upward pricing pressures seem certain to continue even in these uncertain times. For more visit www.fairdealproperty.ie
