Transcription
I want to share a thesis I've been working on. It's half formed, it's half baked, it's still kind of all coming together, and I could be completely wrong, but I think it's worth talking through because if it holds up, it completely changes how we should be thinking about the Irish property market. And here it is.
We didn't avoid a housing crash in Ireland. We just didn't see it because we were measuring it against the wrong thing. Tell me what you think about this as I go through this in the comments below and kind of where I've come to so far.
If you look at the housing prices charts that are out there at the moment, the normal property price, Euro property price looks like it tells a particular story. In the 2000s, the average Dublin house was priced around €190,000. The Celtic Tiger hit, and by 2006, we were up at about €380,000. And then the crash happened in 2008, and we all know what happened. And then by 2012, we were back down to about €170,000 in terms of property prices. That was roughly about a 55% drop. The recovery was slow at first, and then fast. And then today, in 2026, we're looking at an average house in Dublin costing about €500,000, and the national average sits around €400,000. These are all-time record highs, or well above the peak in terms of the boom back in 2006-2007 in terms of nominal prices.
And this is where most people get it wrong, or most people stop. When they see €500,000, they see, or they believe, Irish house prices are unaffordable or overpriced, and the crash is about to happen. And that's where the analysis is slightly flawed, or majorly flawed, and there's one big issue. We measure housing against euro, and the euro isn't a fixed unit of measurement. It changes. It gets printed. It inflates, and it loses its purchasing power.
So, let's measure housing against something else. If you want to strip away a currency as a measure, and look at a real kind of exchange rates. Look at houses versus hard assets. And one hard asset that you could look at is gold. Gold has been a store of value for thousands of years. It can't be printed. Supply only grows about 1 to 2% per year. So, how many ounces of gold would it actually cost to buy a house in Dublin?
In 2000, gold was around $280 an ounce. In Dublin, it would cost around 630 oz of gold for a house back then. At the Celtic Tiger peak in 2004-2006, it would have cost around 846 oz. That would have been the most expensive time to buy a house in real terms compared to gold. Then the crash happened, and by 2012, Dublin house prices were at their cheapest in recent times, and gold was [snorts] actually at its peak. So, a Dublin house would cost around 131 oz of gold. Today, gold is at its record highs, around $3,000 an ounce. Dublin house prices, as we said, are around €500,000. So, therefore, it would cost roughly around 167 oz of gold for a house. That's well below where it was previously. And nationally, an average house at €400,000 in Ireland would cost roughly around 133 oz.
Let's think about that for a second. 133 oz. I know I get slagged for my trees, but that's almost exactly where Dublin was at the absolute bottom of the worst property crash in history in 2012. There was a 55% nominal drop, and then there was a bailout of austerity, and houses cost roughly around 131 oz of gold. Today, the average house in Dublin costs roughly 131 oz of gold. The nominal price in euro terms is at an all-time high, but in gold terms, we're back down to the floor of the crash of 2012.
In 2019, prices had climbed back up since 2012. The cycle looked pretty long, and there was lots of people quietly expecting a slowdown. Looking, looking at some of these charts, you could make an argument that house prices did drop, and they stopped rising, but prices kept rising in a euro point of view throughout COVID. Looking at the gold chart in 2018, Dublin house prices cost 354 oz. By 2019, it had already started to fall down to around 296 oz, and the slowdown that everyone was expecting had started, not in euro terms, but in gold terms.
Then COVID hit. Governments, central banks started to print money on a scale no one had seen before outside of wartime, and the ECB expanded the euro zone money supply by roughly 25% over 2 years. This flooded new currencies into everything from uh crypto, commodities, stocks, and also into properties, pushing all prices, but the real value was actually falling. In 2018 to today, Dublin house prices in terms of gold prices have fallen by more than 53%. That's the real value has gone. While the euro price has gone up. So, if you were to strip away or strip out inflation entirely, in real purchasing power terms, Dublin house prices in 2026 are almost exactly where they were in 2018. >> [snorts] >> Eight years of nominal increase and eight years of like real zero growth. The slowdown or that crash perhaps did happen just as COVID hit. But, there was enough money printed to hide it.
And you can run the same tests against equities. Say you had a house or you had €190,000 in cash back in 2000. You decided to buy a house in Dublin, or you could invest it in the S&P 500. If you bought the house for €190,000, by 2006 it was €380,000. That looks brilliant. Then it crashes down to €170,000 by 2012. That looks terrible. But today, you're back up to €500,000. Okay, that's a 26-year span. You've roughly made around 2.6 times your money. If you were to do the same with the S&P 500, you'd have produced 4.5 times the return, a much greater return in the stock market. The stock market has outperformed the Irish residential property market over nearly every measurable whole period over the last 25 years.
And there is a thing that is keeping the nominal prices, the euro value, propped up. And I think most people are aware of this, but basically Ireland stopped building houses for the last 17 years. At the Celtic Tiger, at the peak, we were building, as everyone knows, about 80,000 units a year. That was way too many, caused a crash because there was oversupply and cheap credit, and there was a lot of speculation. When the crash hit, we went from 80,000 homes a year to 5,000 homes, and that just wasn't enough to support the country that needed 30,000 to 35,000 a year to keep up with demand. And we've never really recovered from that, and we're still not hitting those numbers, or the numbers that are needed.
Normally, when real value of an asset collapses, you see it in the nominal price to the euro value, too. But in Ireland, supply fell so catastrophically low, demand never really went away, or never went anywhere, or had nowhere to go. So, the euro value price never really hit the floor. And that had nothing really to do with value, but it had everything to do with scarcity at the time. If we'd built at a normal rate since 2010, I believe we would have seen a crash or a big slowdown happen in 2018, 2019. But because we didn't, we got an invisible one, measured only in gold or adjusted in terms of inflation. In any real terms from purchasing power, housing has lost value over the last decade. But most people don't notice this because it's priced in euro, and that euro has held up.
Quickly, kind of looking at the inflationary element, or the inflationary story, that kind of reinforces this. Cumulatively, inflation in Ireland from 2000 to 2026 is roughly 70 to 75%, meaning €1 in 2000 has the same purchasing power as roughly €1.73 today. That 2006 €380,000 Dublin home at its peak, adjusted for inflation up to now in 2026 in money terms, should be over €650,000. Today, Dublin house prices sit at €500,000. Still 25% below the real peak if you would adjust it for inflation.
But, the details that really change everything here and how you read this chart. The ECB M2 money supply, >> [snorts] >> the total amount of euros circulating in the Eurozone has grown by 209% since 2000. If Dublin house prices were to simply just keep pace with the money being printed, uh €190,000 home back in 2000 should be worth roughly around €587,000 now, but we're sitting at €500,000. That's still 15% below the actual money supply growth. So, if you think about that for a second, the lines on those charts look expensive from a euro point of view, but if you are thinking about waiting for a crisis to happen or a crash to happen, they're actually trailing below the money supply and it's trailing below inflation as well. So, those prices aren't anywhere near where they could be.
And if you look at this carefully, the real price tells a different story. If you strip out inflation, Dublin house prices have essentially been flat for 8 years. The euro value nominal price has gone from €380,000 up to €500,000, and that looks like a really big move. But, real, in real purchasing power terms, the index has barely shifted from 148 in 2018 to 150 in 2026. 8 years, pretty much zero growth in real terms in terms of purchasing power. The euro price tells one story. The real value tells you nothing happened over the last 8 years.
And perhaps a crash did actually happen. And so if you did buy a property in Ireland in the last 8 years and you think you've made money out of it, in real terms you haven't. The number on paper went up, the euro value went up, your purchasing power didn't. At best, you kept pace with inflation, but you lost ground against every other asset type.
And there is one element that I have to discuss or bring up in this whole argument, and it's an honest counter-argument to this because it is real and it would be wrong to skip over it. Everything I've said about asset value from a housing point of view, how it compares to gold, equities, inflation, all those measures are true, and housing looks relatively cheap from other assets in that terms. But from an affordability point of view, that's a different question. Affordability has gotten worse. Wages for most Irish workers have, except if you're at the very top tier of the tech sector, have not kept pace with the housing market. The path to ownership, getting a deposit, paying mortgage payments, and having to do years of savings to get your deposit have all got harder and harder for people to get on the property ladder. Both things can be true here. Housing can be undervalued from an asset class point of view, but still increasingly out of reach for the average earner. Both of those realities can hold true, and I think that is what's the most frustrating element of all of this.
And then there's this that I've been thinking about for the last few weeks as well. The needle has perhaps moved in so far on assets in terms of nominal value that it's hard to ignore. Like OpenAI is currently valued somewhere around $300 billion. And it generates roughly around $4 billion in revenue. That's a multiple of 75 times earnings. Now, an average one-bed apartment in Dublin might rent for €2,000 a month, say. That's €24,000 um a year in terms of revenue. Applying the same valuation multiple that applies to some of these tech firms, or people are happy to apply to AI firms, €24,000 a year by 75, your one-bed apartment in Dublin is now worth €1.8 million if you use that multiplier. And if you were to apply the multiplier that people are applying to SpaceX at 100 times revenue, that one-bed becomes €2.4 million. Obviously, this is absurd and it's a joke, but it's just illustrating this point. No one values houses at 75 times rent. The normal rate would be like 14 to 20 times, and sometimes in really nice areas 25 times. But that gap shows you something. It shows you the narrative and where we've gone on asset values and where euro is and where dollar is. The market will pay 75 times for a loss-making software company and 20 times for a physical asset in a land-constrained city that generates real cash that can't be replicated with server farms.
And here is where I'm kind of landing on this, or where my thoughts are beginning to form. And to be honest, I'm still not there. I still haven't landed yet. Ireland had a housing crash. It happened in gold terms, in inflation-adjusted terms, relative to equities, and relative to the money supply. The normal euro price never told you that because supply collapsed so badly that scarcity kept the euro number artificially high. That slowdown that people expected in 2018-2019 did actually happen. Government papered over it with printing money, and but in real terms, prices haven't gone anywhere since 2008. And if you bought a property in the last 8 years thinking you've made money in purchasing terms, you haven't really made much at all.
And here's the interesting one that I'm still trying to wrap my head around. The average house price in Ireland measured in gold sits the same level as the floor in 2012 crash. Also, houses are about 15% below where the money printer is tracking. And the S&P left housing well behind. And I genuinely don't know what that means yet. Does it mean that we're at the bottom? Does it mean that properties are undervalued right now as an asset class compared to others? Are they going to move up, or are they going to move down? Or is there something going to happen in the stock market that blows the whole thing wide open? Because one thing I'm fully, I haven't fully worked out yet, is what happens to Ireland if an AI bubble does burst. Ireland's economy is obviously very exposed to US tech more than any other country in the world. So, if that happens, there could be layoffs in Dublin, and how does that impact the property market? And will scarcity be a thing, or will real value hold up? I haven't got the answers, or clean answers on this yet. I'm still kind of like figuring it all out. So, I genuinely, I'm not trying to hedge here. I'm just trying to figure out what's going on. But, what I do think is the data from a euro point tells a very different story compared to other assets. And I think that matters.
I'm still working through this, but I'd love you to share your thoughts in the comments below. And I want to know what I've missed here, or what I could add in uh, or what I've got wrong. Um, so, whatever you're thinking as well on this, please add it to the comments. And as always, thanks for watching.