While our attention has been focused on rebuilding the economy, profound changes in Ireland’s demographic structure have largely gone unnoticed. However, an astonishing fact is that the number of twenty-somethings in Ireland has fallen by almost one quarter since 2009, and the decline in Dublin has been even greater. This generational vacuum has far-reaching implications for all aspects of civil and commercial life – including housing.  

A popular misconception – based on the fact that net emigration has been running at over 30,000 per annum in recent years – is that Ireland’s population is falling. In fact the opposite is true and, given our prolific fertility rates, the population has actually increased by 360,200 since 2006. Based on a Census average of 2.73 bodies per occupied dwelling, this implies a natural demand for at least 132,000 additional housing units. This has contributed to a sharp pick-up in Dublin house prices, leading to calls for more new construction to prevent the recurrence of a housing boom.

While these arguments are well made, a more nuanced debate on the appropriate mix of new residential development is in order.  For this we need to consider the composition of Ireland’s recent population growth.  Between April 2009 and April 2013, 296,800 new babies were born.

Nationally, this has led to a 9.1% increase in the number of children of four and under, while in Dublin the increase has been 14.3%. These infants come with all manner of bulky accoutrements which require space. Moreover, they like outside space to play and their mobility is facilitated by surface car parking and the absence of stairs. Clearly, these requirements are not best met by apartments.

Unlike young children, twenty-somethings are life’s natural apartment dwellers. Because they spend less time at home and have yet to accumulate the paraphernalia of family life, space is not a priority. Instead their emphasis is on location, with proximity to work, social amenities and transport links being the critical factors. Shockingly, however, the number of people in the 20-29 age group has fallen by 176,200 since 2009 – a decline of 23.2% in just four years.  Again, this trend is more pronounced in Dublin where the number of twenty-somethings has declined by 26.3%.   

This phenomenon is partly due to emigration; in net terms 60,786 people in their twenties have left Ireland since 2009.  But the main cause can be traced back to a sharp reduction in birth rates during the 1980s. As illustrated below, births rose steadily through the 1970s before peaking in 1980. This caused the number of people entering their twenties to reach a peak two decades later in 2000.

Throughout the noughties this cohort bolstered the 20-29 age group. But by 2010 the babies of 1980 were heading into their thirties. Since then, the number of people exiting their twenties has outstripped the number entering this phase of life, leading to the sharp fall in 20-29 year olds that we are now witnessing.

Given that births went on falling between 1980 and 1994 we can expect this dynamic to continue until 2025. Therefore, even allowing for some returning migrants, we must get used to the idea of having fewer 20-29 year olds. This may require us to moderate our sporting expectations – it is no coincidence that Brian O’Driscoll, Paul O’Connell, Damien Duff and Richard Dunne were all born within 12 months of our fertility peak in 1980, and are therefore in the cohort that gave us the greatest number of players to choose from. But there are more profound implications - for labour supply, pensions and personal consumption - which business leaders and policy makers need to plan for. And we must also plan properly for housing.  

A critical element of this is to recognise that, in most locations, new residential development should be weighted towards family homes rather than apartments. Of course there is an ongoing demand for apartments in city centre locations and locations which are close to key transport nodes. Outside this, in some established neighbourhoods there is a market for well-designed apartments for people trading down. It is appropriate that planning authorities seek high density development in these locations. But, because of our recent baby boom and the fact that our stock of twenty-somethings is falling, demographics have undermined the natural market for apartments outside these locations.   

While some local authorities have recognised the need for a greater element of family homes, others are still insisting on higher density development. This has caused stalemate and continues to do so. We urgently need new homes to check rapid price growth in Dublin. But, because of limited end-user demand, current sales prices often do not justify the costs of constructing apartments. As a result willing developers find that they cannot proceed with projects that would create jobs and inject much needed supply into a tightening market.

Dr. John McCartney is Director of Research at Savills Ireland