Assessing a “fair value” for housing prices can be complicated, but currently, in spite of a robust employment landscape, properties in Ireland seem overpriced especially for typical income earners. Yet, these high prices are sustained due to the influx of wealthier individuals and high earners to the country, maintaining a steady demand for costly properties. Consequently, the housing market continues to be dominated by cash transactions, further driving up prices, as recently highlighted by an 8.6% rise in the year up to June according to statistics from the Central Statistics Office.
This trend of escalating house prices has unfortunately rendered properties less of a viable option for those with average incomes. This was highlighted in recent research from the Society of Chartered Surveyors in Ireland (SCSI), that revealed that even a couple with a respectable combined income of €107,000 could not afford homes in several counties, despite Government assistance schemes. Yet, even if this income bracket of tens of thousands of individuals are unable to partake in several segments of the housing market, properties continue to sell swiftly. This high influx of money into the market, predominantly from high earners and cash buyers, is prevalent according to Pat Davitt, the CEO of the Institute of Professional Auctioneers & Valuers.
The unique economic framework in Ireland contributes to this scenario. Numerous high-income individuals are employed in well-rewarded sectors such as tech and pharma, along with the ecosystem of professional services supporting them. These industries also have a trickle-down effect, inflating costs and earnings elsewhere. These conditions make living in Ireland expensive, leaving many typical earners financially strained.
Significantly, despite complications faced by some tech firms, the population of high earners in Ireland has seen rapid growth recently. Revenue Commissioners estimates indicated that the count of entities – including jointly-assessed couples and single earners – earning over €100,000 annually, has doubled from 177,000 in 2018 to 357,000 this year. There has been an addition of about 100,000 in this category since 2022. This has resulted in a surge of purchasing power in the economy – a fact echoed by the housing market.
As the government initiative for defective bricks takes effect, occupants in Donegal are transitioning to mobile homes. There’s a tangible disillusionment amongst voters towards political leaders and their perceived incapability to address housing issues. The scale of the housing crisis has led to an immense sense of desperation amongst the younger demographic.
Studying longer-term patterns can shed more light on this situation. Since the housing market’s nadir in 2012/13, wages across the country have surged about 40%, whereas in the lucratively paid tech industry, the increase is roughly 80%. Hence, the disparity between average and top-tier earners is widening.
Those purchasing properties in cash – incorporating individuals who have offloaded their previous residences as well as affluent expatriates working here – are taking precedence in the home buyers’ queue. Property prices, undoubtedly, have experienced even steeper rises – from roughly €155,000 to €337,000. This price bump is primarily supported by economic fundamentals.
The national economy has transitioned from a debt crisis accompanied by 15% unemployment towards sturdy growth and a sub-5% jobless rate. The population has experienced significant growth, with a noted increase of nearly four individuals for each new property constructed recently. Given that each home houses an average of approximately 2.6 people, the deficit is evident.
This mix of inadequate supply amidst a thriving economic environment is responsible for driving up property prices. The increase was temporarily mitigated by the Covid pandemic and the subsequent cost-of-living struggle. However, presently, property professionals and economists are upwardly revising their annual property valuation forecasts.
Predicting a fair valuation for housing prices in Ireland is challenging due to the dichotomy between the high-income sectors and their more modestly compensated domestic counterparts. However, it is undeniable that housing prices are becoming progressively unaffordable for average wage earners, inclusive of dual-income households. The market, on the whole, is exhibiting signs of overpricing. The duration and resultant economic fallout of this rising phase in Ireland’s property market cycle is something we have experienced previously.
The quirky nature of the housing market mirrors various current trends. A small quantity of used properties entering the market are quickly seized, with wealthier buyers ruling the roost in the middle and top sections.
Those who splurge with cash, encompassing individuals who have sold their previous residences and affluent newcomers seeking employment, are the frontrunners of the buyers’ line. Property agents suggest that these cash buyers presently make up to 40% of their clientele in certain market sections. Following them are more well-off individuals already approved for mortgages. The market has an ample selection of partnered couples boasting combined incomes ranging from €250,000 to €300,000, enough to create a significant impact in a market with limited property sales. To the detriment of first-time buyers, they are finding it increasingly hard to penetrate the used properties market, most notably due to support policies such as Help-to-Buy being exclusive to new builds and lofty pricing.
Nowhere else is the double-track quality of the Irish property market more visible than within new home industries. Couples with a combined income of €250,000 or cash purchasers are buying homes worth more than €1 million in Dublin’s peripheral suburbs. Meanwhile, middle-income earners from the capital are migrating to outer boundaries of the county or embarking on daily commutes from places like Kildare, Meath and Wicklow, purchasing properties barely under the €500,000 Help-to-Buy limit due to the more economical land prices, thus favouring builders.
The extraordinary wealth generated by multinational organisations has been a windfall for Ireland, spawning thousands of lucrative jobs and contributing billions in tax revenue. This has resulted in a substantial increase in federal expenditure. Nonetheless, this two-tiered economy gives rise to complexities, and housing is one aspect of this narrative. The perpetual escalation in property prices might partially mirror economic prosperity and increased income, however, it doesn’t bode well for the Coalition in anticipation of a general election. With property prices predicted to inflate further, another reason for ministers to prompt an early general election comes into play.