The Irish housing market is bucking global trends despite declining house prices in Dublin, property experts say.
Dublin house prices are continuing to drop, with latest figures from the residential property price index from the Central Statistics Office showing a fall of 1.9 per cent in August, but growth is being recorded across the country.
It is the second month in a row that prices fell in the capital. While experts attribute this to various factors — including high interest rates impacting the higher-priced houses and an exodus of tech workers from the city — the market is not going through what the UK, United States and the Continent are facing.
In Ireland as a whole, house prices have grown by 0.9 per cent on average. According to Conall Mac Coille, chief economist at Bank of Ireland, while Irish house prices have largely stagnated, the UK has seen drops of between 5 and 10 per cent. Belgium, Holland and the Scandinavian countries have also reported falling prices.
“Ireland is behaving differently this time and it shows there is a much greater gap here between demand and supply. Our economy is functioning really well and there’s lots of job growth which is driving demand, and then there’s clearly a lack of supply,” he said.
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Sherry FitzGerald’s latest second-home report for the third quarter of 2023 showed that housing stock was at an all-time low in Ireland, with 13,750 houses available to buy across the country.
Despite the lack of housing, buyers remain undeterred. Recent figures published by the Banking & Payments Federation Ireland show that the average mortgage approval in August was €300,000, up 5.8 per cent on the same month last year and the first time it had reached this level.
Mac Coille said this showed that “people are still applying to borrow more money despite the European Central Bank [ECB] hiking rates,” he said.
On Thursday the ECB held the interest rate steady after ten successive increases since July 2022.
While the third quarter of the year has also seen a jump of 14 per cent in new dwellings completed compared with the same time in 2022 — a figure that Dermot O’Leary of Goodbody stockbrokers said is “better than expected” — this would not account for the fact prices dropped in Dublin.
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He said that it would have “some influence” but that demand would be more significant (or rather a drop in demand). He said even though “the flow of new properties is large in a historical context, it is still a small proportion of the overall stock”.
With high interest rates currently impacting profitability both in Ireland and abroad, a question mark hangs over whether now is a good time to buy.
Derek Maguire, a financial adviser at Financial Architects firm, says it is a good time to buy for both a first or a second home. “Renters that buy an average home will save €800,000 in their lifetime because the cost of repaying a mortgage is so much less,” he said.
And when it comes to securing a decent pension, he said a second home makes a much higher return than what a financial institution will be able to generate.
“If you buy a property for €300,000, you generate a rental income of about €20,000; it would take only 10 years to build up to a pot of €500,000 [when you sell],” he said.
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As for buying abroad, Maguire said it was never really a good time to invest as these properties tend to cost the owner more money to maintain, with no tenants in situ. “They are normally a lifestyle choice but it actually makes more sense for people to rent for six months of the year, in Spain for example, than purchase,” he said.
“Off season an agent might drop rent to a thousand euros a month, so it’s a no-brainer,” he added.
