Population projections, the flow of new households and structural housing demand

This report provides estimates of structural (demographic) housing demand at a regional level. Any assessment of structural future housing demand relies on assumptions around (1) population growth, (2) headship rates (the typical household size) and (3) rates of obsolescence of the housing stock. Each of these key drivers of structural housing demand is subject to uncertainty, therefore a range of alternative assumptions for each key driver is considered and results from a range of scenarios are presented.

Ireland has experienced rapid population growth in recent years, both compared to historical experience and relative to the EU. Census 2022 data reveals that the population was 5.184 million, having increased by 422 thousand or by 9 per cent since 2016. The recent data means that many previous population scenarios for Ireland have underestimated population growth over the short term. Net migration is the key driver of population change in Ireland and net migration flows have been very strong in recent years.

As in the past, while all regions experienced population growth, the growth has not been evenly dispersed throughout the country. At a national level, the population grew at an annual average growth of 1.4 per cent between 2016 and 2022; the Eastern and Midlands region experienced the strongest growth of 1.6 per cent (driven especially by growth in the Mid-East). At a national level, in the baseline population scenario, the population is expected to increase by 922k between 2022 and 2040, resulting in a total population of over 6.106 million people by the end of the period. This implies significant overall population growth of 1.0 per cent on an annual average basis, which is high relative to other countries. Given the key role of international migration in shaping population growth in Ireland, a range of alternative scenarios are considered where migration is higher and lower than in the baseline scenario. While this provides a range for alternative international migration scenarios, any unanticipated major structural changes may require the projections to be revised. In the high (low) international migration scenario, the population grows by 1.2 (0.8) per cent on an annual average basis over the period and reaches 6.308 (5.904) million by 2040. By 2040, the difference in the population between the high and low international migration scenarios is just over 400k, showing how sensitive the overall population projections are to different assumptions around net international migration.

At a regional level, while all regions are expected to experience population growth over the projection horizon, the Eastern and Midlands region is expected to experience relatively higher growth, concentrated in the Dublin and Mid-East regions, while the Northern and Western and Southern regions are expected to experience relatively lower population growth.

Transforming population projections into the number of future households requires assumptions on headship (the typical household size). To date, headship has been parameterised in existing research using current data and scenario-based analysis. The report uses two sets of alternative sets of assumptions for headship rates, one based on current trends in the data and another based on new research evidence, where headship rates increase (or household size falls), consistent with the magnitude and pace of the fall in household size observed in other European countries. Applying these sets of headship rates to the population scenarios provides estimates of the flow of new households. The report also draws on numerous different sources and methods to generate a range of obsolescence rates for the housing stock. Two obsolescence rates are used in the projections – a lower rate of 0.25 per cent and a higher rate of 0.5 per cent.

It is important to state the report presents a range of scenarios for future structural housing demand based on a set of assumptions. Across all scenarios, assumptions are driven by data and international trends, and the research evidence base. To highlight the uncertainty associated with any projection exercise and the sensitivity of projections to key assumptions, the projections in the report are presented in terms of ranges. Furthermore, factoring in prevailing pent-up household demand is beyond the scope of this research. The scenarios present the flows of household demand over time. In any year, if the demand is not met, it can accumulate in subsequent years.

Based on the three demographic scenarios (baseline, high international migration and low international migration), as well as a range of assumptions on headship rates (based on current trends and a fall in household size) and obsolescence rates (0.25 per cent and 0.5 per cent), 12 main structural housing demand scenarios are considered. Taking the average over all 12 scenarios, structural housing demand is projected to be around 44,000 per annum (p.a.) from 2023–2030, and around 39,700 p.a. over the 2030–2040 period. In the baseline population scenario, estimated structural housing demand in the period 2023–2030 ranges from around 38,000 p.a. (assuming current trends in headship and a 0.25 per cent obsolescence rate) to 50,000 p.a. (assuming household size falls and a 0.5 per cent obsolescence rate). In the high (low) international migration population scenario, estimated structural housing demand for the same 2023–2030 period ranges from around 40,700 (35,000) p.a., assuming current trends in headship rates and a 0.25 per cent obsolescence rate, to 53,000 (47,000) p.a., assuming a fall in household size/increase in headship and a 0.5 per cent obsolescence rate.

At the local authority level, we find that Kildare, Meath, Fingal, South Dublin, Dublin City, Galway City, Wicklow and Laois have lower levels of structural housing demand than population share. Meanwhile, Longford, Cavan, Monaghan, Kilkenny, Cork City and Carlow have structural housing demand on par with the population share, while the remainder of local authorities have higher levels of structural housing demand than the population share. However, any differences between structural housing demand relative to population share, either higher or lower, are relatively small.