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Ireland: Overview

Last Updated: Nov 03, 2009

No end in sight for Irish house price falls

Ireland is experiencing its worst recession in recent history, and yet house prices continue to plummet, creating a dangerous downward spiral.

In August 2009, the average house price in Ireland was €235,260, 1.5% down on the previous month, 13% down on a year ago and 24% lower than the February 2007 peak, according to Permanent TSB/ESRI.

When adjusted for inflation, the average house price was 1.9% down on the previous month, 7.6% from a year earlier and 25% from the peak.

A particularly worrying sign is that while house prices in other countries are starting to recover, August 2009 saw the worst house price falls ever in Ireland.

If Dublin continues to precede the national cycle, the situation will get worse before it gets better.  The average house price in Dublin was 1.9% (2.3% in real terms) down on the previous month and 28.6% (29.6% in real terms) below the April 2007 peak price. Outside Dublin, the average house price was down 2.4% (2.8%) on the previous month, and 23.5% (24.2%) lower than the January 2007 peak price.

After contracting by 3% in 2008, the economy expected to shrink further by as much as 9% in 2009 and 2.5% in 2010. With the country entering a period of deflation, more problems will be encountered. Economic growth is not expected return until 2011 and the housing market is not seen to stabilise until then.

There are no restrictions on foreigners buying property.

Read Price History  »

RENTAL YIELDS

Last Updated: Jun 24, 2009

No 2009 yields for Ireland

There is not enough information to produce yields figures in Dublin. Prices of apartments average to €365,200 while houses range from €453,600 (75 sq. m.) to €1,074,900 (150 sq. m.) for an average of €764,250

Read Rental Yields  »

TAXES AND COSTS

Last Updated: Nov 04, 2008

Taxes on rental income and capital gains are moderate

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 20%. Acquisition costs, incidental expenses, and improvement costs are deductible from the gross selling price.

Inheritance: Inheritance tax is imposed at a flat rate of 20%, 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.

Read Taxes and Costs  »

BUYING GUIDE

Last Updated: Mar 27, 2007

Buying costs are moderate in Ireland

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%.

Read Buying Guide  »

LANDLORD AND TENANT

Last Updated: Jun 06, 2006

Strong but fair tenant protection in Ireland

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.

Read Landlord and Tenant  »

ECONOMIC GROWTH

Last Updated: Nov 03, 2009

Economic growth has weakened

Ireland is currently suffering one of the worst recessions experienced by an industrialized country since World War II. Having enjoyed one of the highest growth rates in the Eurozone from 1995 to 2007, the economy contracted by 3% in 2008. GDP is expected to fall by as much as 9% in 2009 and 2.5% in 2010, among the worst in the EU outside of Eastern Europe.

After contracting by 15.5% in 2008, gross fixed capital formation is expected to fall by 32% in 2009 mainly due to the 36% fall in building and construction activities.

Despite Ireland’s economic meltdown, the government had adopted a conservative approach, focusing on balancing the budget, even opting out of the EU’s €200 billion economic stimulus package.

One reason for the government’s caution is the dramatic decline in tax revenues brought about by the economic turmoil, largely due to decline in the collection of property-related taxes. From a budget surplus of 3% in 2006, the fiscal situation worsened in 2007 to a surplus of only 0.05% of GDP. In 2008, the budget balance turned to a whopping 7.3% of GDP deficit. A forecast deficit of more than 12% of GDP is expected in 2009 and 2010, way beyond the EU’s 3% budget deficit limit.

To balance the budget, the 2009 budget hiked income taxes (from minimum-wage earners to the wealthiest individuals), cigarette and diesel fuel taxes, to raise €3.5 billion in revenues.

The government also halved unemployment benefits and early child-care payments. The traditional bonus payment for social welfare recipients was also scrapped.

Spending is likely to be cut further in 2010, and taxes increased. The 2010 Budget includes a €5 billion fiscal adjustment:
     • €4 billion reduction in current expenditure; which includes
            o €1.4 billion cut in public sector pay;
            o €1.3 billion cut in social welfare costs; and
            o €1.3 billion cut in delivery of services
     • €0.5 billion in tax base broadening; and
     • €0.5 billion in capital expenditure savings.

 

  • Strong and stable economy
  • Low to moderate costs and taxes
  • Strong rental market for migrants
  • Rent decline in recent years
  • Significant pro-tenant laws

RESIDENTIAL PROPERTY FACTS
Price (sq.m): €5,483 For a 80 sq. m. property, usually an apartment. Rental Yield: n.a.
Rent/month: n.a. Income Tax: 10.05% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 7.0% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 18.6% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord & Tenant Law: Pro-Tenant Rating is based on a detailed study of each country’s law and practice.


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