Ireland’s economy is now slowly recovering, but its residential property market is still in deep trouble. In 2011, the national residential property price index plunged by 16.7% (-18.7% inflation-adjusted), based on data released by the Central Statistics Office.
On a quarterly basis, the residential property price index dropped by 5.36% (-5.39% inflation-adjusted) in Q4 2011, after quarterly declines of 3.83% in Q3, 4.18% in Q2, and 4.47% in Q1.
The national average asking price for residential properties fell by 18% to just above €175,000 in 2011, after falling 15% in 2010, according to Daft.ie, Ireland’s biggest property website.
In Dublin, the capital, asking prices of residential properties continued to fall in December 2011 and are now more than 50% below the peak levels seen in mid-2007.
In other areas, house prices are also plunging.
Ireland’s house price boom was one of the biggest in Europe, with prices for new houses surging by more than 200% from 1997 to 2007, and average used home prices rising by around 280%. When the bubble burst in 2008, it was the world’s biggest property bust.
The total number of properties on the market was 56,000 by end-2011, the lowest level since mid-2008.
The banking sector is in deep distress. In 2011, Irish banks issued around 13,000 mortgages, down almost 95% from the 200,000 mortgages issued in 2006. About 47.5% of all outstanding mortgages were in negative equity by end-2011, up from 31% in 2010.
On the other hand, rents are now stabilizing. The national rent index rose slightly by 0.5% in January 2012 from the previous year, according to Daft.ie. However, the rental index is still 26% below the peak levels of mid-2007.
It is difficult to forecast when residential property prices are likely to reach bottom, but everyone agrees that Irish property prices will continue to fall in 2012.
On a quarterly basis, the residential property price index dropped by 5.36% (-5.39% inflation-adjusted) in Q4 2011, after quarterly declines of 3.83% in Q3, 4.18% in Q2, and 4.47% in Q1.
The national average asking price for residential properties fell by 18% to just above €175,000 in 2011, after falling 15% in 2010, according to Daft.ie, Ireland’s biggest property website.
In Dublin, the capital, asking prices of residential properties continued to fall in December 2011 and are now more than 50% below the peak levels seen in mid-2007.
- In the city centre, the average asking price was €159,099, about 61.2% below the peak level
- In South Dublin Country, the average asking price was 55.3% below the peak, at €322,754.
- In North Dublin County, the average asking price was €215,939, around 51% below the peak
- In West Dublin County, asking prices were 53.7% below peak levels, at an average of €177,729.
In other areas, house prices are also plunging.
- In Carlow, in Leinster (the eastern part of Ireland), the average residential asking price was €162,673, down 48.1% from peak levels
- In County Cork, the most populated area in Munster (the country’s southernmost region), the average asking price was €181,209, down 48.2% from the peak
- In County Galway, the most populated and the main urban area in Connacht (the country’s western region), the average asking price was €152,094, down 50.7% from the peak level
- In Monoghan, which is located in Ulster (the northern part of Ireland), the average asking price was €160,563, down 50.9% from peak levels
Ireland’s house price boom was one of the biggest in Europe, with prices for new houses surging by more than 200% from 1997 to 2007, and average used home prices rising by around 280%. When the bubble burst in 2008, it was the world’s biggest property bust.
The total number of properties on the market was 56,000 by end-2011, the lowest level since mid-2008.
The banking sector is in deep distress. In 2011, Irish banks issued around 13,000 mortgages, down almost 95% from the 200,000 mortgages issued in 2006. About 47.5% of all outstanding mortgages were in negative equity by end-2011, up from 31% in 2010.On the other hand, rents are now stabilizing. The national rent index rose slightly by 0.5% in January 2012 from the previous year, according to Daft.ie. However, the rental index is still 26% below the peak levels of mid-2007.
It is difficult to forecast when residential property prices are likely to reach bottom, but everyone agrees that Irish property prices will continue to fall in 2012.
Analysis of Ireland Residential Property Market »
RENTAL YIELDS
Last Updated: Jun 02, 2011
The housing crash initially resulted in a huge expansion of rental offers. From 6,200 units in August 2007, the number of properties for rent rose significantly to more than 23,400 in August 2009. However, the stock of rental properties has now fallen to less than 18,000 (October 2010).
Dublin rents actually rose during 2010, but are still 30% below their peak levels.
• The all-Ireland rent index fell 2% y-o-y to October 2010, according to Daft.ie, a significant smaller fall than last year’s 17% rent collapse. The average rent in Ireland in Q3 2010 was €840 per month, down from €880 in mid-2009.
• On average, rents in cities rose 0.7% y-o-y while rents in non-city areas fell 0.7%.
Yields have slightly improved but remain stubbornly low.
• The average rental yield across Ireland for Q3 2010 was 3.8%, up from 3.4% in Q3 2009.
• Dublin’s yields are slightly better at 5.5% in the city centre. In other Dublin counties, yields range from 4.0% to 4.7%.
Dublin rents actually rose during 2010, but are still 30% below their peak levels.
• The all-Ireland rent index fell 2% y-o-y to October 2010, according to Daft.ie, a significant smaller fall than last year’s 17% rent collapse. The average rent in Ireland in Q3 2010 was €840 per month, down from €880 in mid-2009.
• On average, rents in cities rose 0.7% y-o-y while rents in non-city areas fell 0.7%.
Yields have slightly improved but remain stubbornly low.
• The average rental yield across Ireland for Q3 2010 was 3.8%, up from 3.4% in Q3 2009.
• Dublin’s yields are slightly better at 5.5% in the city centre. In other Dublin counties, yields range from 4.0% to 4.7%.
TAXES AND COSTS
Last Updated: Aug 31, 2011
Rental Income: Gross rental income is taxed at 20%, withheld by the tenant. The taxpayer may file a return and claim relief for expenses related to his property.
Capital Gains: Capital gains are taxed at 25%. Taxable capital gains are generally computed as selling price less acquisition costs, adjusted for inflation, and improvement costs.
Inheritance: Inheritance is taxed at a flat rate of 25%, with certain non-taxable amounts deductible before the tax is levied.
Residents: Residents are taxed on their worldwide income. Numerous tax credits and deductions are available to residents; of which the actual values depend on the taxpayer’s personal circumstances.
Capital Gains: Capital gains are taxed at 25%. Taxable capital gains are generally computed as selling price less acquisition costs, adjusted for inflation, and improvement costs.
Inheritance: Inheritance is taxed at a flat rate of 25%, with certain non-taxable amounts deductible before the tax is levied.
Residents: Residents are taxed on their worldwide income. Numerous tax credits and deductions are available to residents; of which the actual values depend on the taxpayer’s personal circumstances.
BUYING GUIDE
Last Updated: Mar 27, 2007
Round-trip transaction costs are around 6.8% of the property price. This can go up to 13.6% because stamp duty is computed at a progressive rate based on the purchase price of the property. Properties that cost more than ?630,000 have the highest stamp duty, at 9%.
LANDLORD AND TENANT
Last Updated: Jun 06, 2006
Ireland has strong tenant protection laws.
Rents. The parties are free to negotiate rents, but the amount must not exceed the open market rate. The rent may be reviewed and can only be adjusted once a year. Rent disputes go to the Private Residential Tenancy Board (PRTB).
Tenure Security. Security of tenure is effective for four years; during the first six months, the landlord can terminate the leasing contract without specifying grounds but once a tenancy has lasted six months, the landlord can only terminate the tenancy for the next 3 1/2 years citing just causes.
Rents. The parties are free to negotiate rents, but the amount must not exceed the open market rate. The rent may be reviewed and can only be adjusted once a year. Rent disputes go to the Private Residential Tenancy Board (PRTB).Tenure Security. Security of tenure is effective for four years; during the first six months, the landlord can terminate the leasing contract without specifying grounds but once a tenancy has lasted six months, the landlord can only terminate the tenancy for the next 3 1/2 years citing just causes.
ECONOMIC GROWTH
Last Updated: Feb 22, 2012
Economic recovery remains slow
Ireland was once called the Celtic Tiger for its high economic growth. The economy grew by an annual average of 9.1% from 1995 to 2000 and by an average of 5% from 2001 to 2007.However in 2008 the overvalued property market collapsed, which eventually caused a banking crisis. Three years of negative real GDP growth followed ( -3% in 2008, -7% in 2009 and -0.4% in 2010). GDP per capita fell sharply to US$46,300 in 2010 from almost US$60,000 in 2007.
To save the banking sector from a certain collapse, Ireland was forced to tap a €67.5 billion bailout from the European Union (EU) and the International Monetary Fund (IMF) in November 2010. The deal imposed a four-year plan cutting government spending and raising tax revenues, the harshest budget measures in Ireland’s history.
The country also spent around €80 billion to establish the National Asset Management Agency (NAMA) to acquire toxic loans, primarily with a view to improving the availability of credit in the Irish economy, and to remove uncertainty about non-performing assets on bank balance sheets.
From a budget surplus of 3% of GDP in 2006, the fiscal situation worsened into a deficit of 7.3% in 2008 and 14.3% in 2009. The budget deficit fell to 9.8% of GDP in 2011, due to massive budget cuts and tax hikes already implemented since 2009. The country is expected to cut the budget deficit to 8.6% of GDP in 2012.
In 2011, the economy grew by 0.4%, mainly due to higher exports. Real GDP growth is projected at 0.5% in 2012.The inflation rate was 1.1% in 2011, from -1.6% in 2010 and -1.7% in 2009, according to the IMF. From 2000 to 2008, the average inflation rate was 3.5%.
From 2000 to 2007, unemployment was stable at just 4.4%. However, unemployment rose sharply to 11.8% in 2009, 13.6% in 2010 and 14.3% in 2011. In January 2012, the jobless rate fell slightly to 14.2%, according to the Central Statistics Office.
Prime Minister Enda Kenny, who swept to power last year, promised to solve the country’s severe unemployment problems and create about 100,000 jobs by 2015.
RSS
Global Property Guide on Twitter
Global Property Guide on Facebook
Global Property Guide on Linked In