The overvaluation is measured against a wage that also has to buy the heating oil

The yardstick is the payslip

The Economic and Social Research Institute measured Irish house prices against incomes, interest rates and demographics, and found them 17% above what those fundamentals support. The yardstick is half the finding. Prices have risen faster than incomes, mortgage rates have gone up, and construction has not kept pace with demand: three sentences that describe a buyer's budget as much as a market.^[1]

The institute was careful about where the risk sits. Household debt and the wider credit market remain well below their levels before 2008, which leaves the financial system considerably stronger than it was then. The pressure lands instead on what a household can afford, a slower and quieter kind of damage: fewer buyers, longer saving, more people renting for longer at whatever the market asks.^[1]

The same budget, a second bill

Meanwhile the same household is filling an oil tank. A standard 1,000-litre tank now costs an average of €1,443.88 across Ireland. A year ago the same tank cost €909.24. The difference is €534.64, paid in a single order before winter by whoever heats with oil, and it comes from kerosene, the fuel the war has hit hardest because refineries in the Middle East were built to maximise aviation fuel.^[2]

Put the two next to each other and the connection is arithmetic. The overvaluation is defined against incomes, prices having risen faster than incomes, and the same incomes are handing over €534.64 more for one tank of heating oil than they did a year ago. Whatever is left after the tank is what has to close the gap on the house. Another reading is available: incomes may have risen enough over the same period to absorb both, in which case the squeeze sits on new buyers and on homes that heat with oil rather than on households in general. The figures published this week do not settle which.^{[1], [2]}

Whose pocket, whose till

The state has money coming in against all this. Corporation tax rose again in August, up by a third on the same month last year to €2.8 billion, and Micheál Martin said plainly that the share of total taxation coming from that source is a concern, because a significant amount of it may be windfall revenue that does not last.^[3]

Some of that money is being set aside for the Future Ireland Fund, against an ageing population and rising healthcare costs, and the rest is going into large-scale infrastructure. Both are defensible uses, and both are funded by company profits, which leaves the cushion under Irish household costs resting on a source the government itself describes as possibly once off. There is a measurable way to watch this. If house prices continue to rise faster than incomes and mortgage rates do not fall, the next published measurement of prices against incomes, interest rates and demographics will show the gap wider than 17% before the end of the year. That is the figure to check, and it is a figure about wages as much as about houses.^{[3], [1]}