House prices in the Republic of Ireland have boomed of late as the country’s housing market recovers fully from its post-financial crisis woes.
Despite Brexit, key questions over the Irish border and political uncertainty, Ireland’s housing market is on a high – with the official house price index soaring to an eight-year peak and average prices in Dublin rising by 87% since 2013.
But what has led to this boom?
A rapidly recovering economy
Ireland was one of the places worst-hit by the global financial crisis, with an £85 billion bailout required from the EU and the IMF to keep the country afloat. The economy and the property market were in pretty dire straits, even as recently as 2012, with unemployment standing at 15.2%, wages slashed and average property prices in Dublin dropping by 56%.
But Ireland’s economic recovery has been just as dramatic. Now, unemployment is around 6%, economic growth is strong and Ireland had Europe’s fastest-growing economy in 2017 – for the fourth successive year.
This has led many to say the Celtic Tiger – the term used to refer to Ireland’s economy in the boom years from the mid-1990s to the late 2000s – is roaring again.
Prices rise drastically
Data from the Central Statistics Office (CSO) showed that annual price growth rose to nearly 13% in 2017, the highest rate of property price inflation since 2015.
This is all the more remarkable when you consider the banking crisis and the subsequent collapse in property prices only happened less than ten years ago. House prices in Dublin were still 56% down on their 2007 highs in the late stages of 2012 and the early months of 2013. But since that low things have improved beyond all reason.
The residential property price index has now increased to its highest level since April 2009, when the effects of the financial crisis really started to take hold. Property prices rose by 12.8% in the year to September 2017, with an annual rate of price growth for Dublin standing at 12.4% for houses and 11.4% for flats. The western part of the city, meanwhile, witnessed the largest annual rise in house prices at 16.5%.
On a national basis, the CSO says house prices have grown by 70% since the early 2013 lows. In this period, prices in Dublin have increased by a massive 87%, but the house price boom has spread across the country with values in the rest of Ireland now 61.4% higher than 2013.
What is fuelling this boom?
As well as the strength of the Irish economy – which is attracting businesses, overseas investment and workers – Ireland is also benefitting from Brexit. Businesses eager to stay within the EU single market are settling down in Ireland, while major corporations opt to base their international headquarters in Dublin because of the favourable tax conditions on offer. Google, Facebook and Airbnb all have their international HQs in Dublin, while investment bank JP Morgan is increasing its presence in the city.
Demand for homes has also been rising continuously in recent times, which is helping to keep prices high. The trend for mass emigration has reversed – partly due to Brexit and Irish citizens eager to remain in the EU returning home, plus a big rise in British citizens with Irish heritage seeking Irish passports and a new life in Dublin, Cork or other major cities. After seven years of net emigration – fuelled by the crash and the tough times this brought for Ireland – things reversed in 2016, the year of the EU referendum.
As well as returnees, Ireland is also proving popular for those seeking more affordable homes. While prices have been on the up and up, the average nationwide house price is around €241,000, while the average price in Dublin is around the €330,000 mark.
High demand and a lack of supply – especially in urban areas – are squeezing prices upwards across the country, with no signs that this will change anytime soon.
Increase set to continue in 2018
A survey carried out by MyHome.ie at the start of this year forecasted that house prices will continue to grow nationally, up by 8% overall, with prices in Dublin rising by between 6% and 7%.
However, prices are expected to rise at a slightly lower rate than has been witnessed in recent years, with tighter Central Bank regulations on loan-to-income ratios set to slow house price growth in the year ahead.
Continued low supply, however, means house price growth will remain strong. At the end of 2017, the number of properties listed for sale was at a record low of 18,900 (or 1% of the total housing stock). The outlook for the overall property market remains, therefore, one of strong demand but restricted supply.
The boom isn’t simply focused on Dublin, although the capital has seen the biggest rises in house prices. In Cork, for example, the average house price rose by 8.8% year-on-year in Q3 2017, while in Galway County prices were up by 8.6% and in Limerick City by the same amount.
Ratings agency Standard & Poor’s believes this growth will continue, with house prices in Ireland rising at the fastest pace in Europe over the next two years. The agency predicts that house prices will grow by 7% in 2018, with the booming economy, a strong labour market, a shortage of supply, low interest rates and continued high demand all playing a role.
Northern Ireland joins in
Latest government figures reveal that Northern Irish house prices have also been increasing, rising by 1% in the final quarter of 2017 to bring the average property value up to £130,482. In the fourth quarter of 2017, house prices were 4.3% higher than the corresponding period in 2016, while they were up by 17.6% on the beginning of 2015.
Ireland’s last housing boom – from 1996-7 to 2006-7 – came to an abrupt halt with the onset of the financial crisis. Economists seem to agree that this time it will be different, with the chances of another housing bubble being burst less likely thanks to stricter lending criteria and the robustness of the Irish economy.