Market in Depth

Ireland's housing market holding up, amidst limited supply

Lalaine C. Delmendo | March 26, 2021

Ireland's house prices continue to rise, mainly due to tight supply. During 2020, the nationwide average house price rose strongly by 7.4% to €269,522 (US$317,741), according to Ireland's largest property website Daft.ie.

Nationally, residential property prices are up almost 88% (86% inflation-adjusted) from the lowest post-crash point in Q1 2013.

All of the country's major counties experienced strong house price rises last year.
  • In Dublin City Centre, the average asking price rose by 7.7% to €345,950 (US$407,842), according to Daft.ie.
  • North Dublin City's average asking price rose by 6.7% y-o-y to €359,966 (US$424,366).
  • North County Dublin's average asking price rose by 7.8% y-o-y to €334,969 (US$394,897).
  • South Dublin City's average asking price increased 6.6% y-o-y to €428,260 (US$504,878).
  • West County Dublin's average asking price rose by 7.3% y-o-y to €320,590 (US$377,945).
  • South County Dublin's average asking price rose by 9.2% y-o-y to €619,012 (US$729,756).

Outside Dublin, average residential prices rose by 4% (4.2% inflation-adjusted) during 2020, according to CSO.<
  • In Cork City, Ireland's second largest city (located in Munster, in Ireland's south), the average asking price rose by 5.8% y-o-y to €296,017 (US$348,976) in 2020.
  • In Limerick City, Ireland's third most populous city, the average asking price rose by 9.6% y-o-y to €220,061 (US$259,431) last year.
  • In Galway, one of the country's biggest cities and known as the “cultural heart of Ireland” (located in Connacht, Ireland's western region), the average asking price increased 8.6% to €317,235 (US$373,990) in 2020 from a year earlier.
  • In Waterford City, also one of Ireland's bigger cities, the average asking price increased 7.6% y-o-y to €195,571 (US$230,560) in 2020.

These continued rises mirror those in many other developed countries, but in Ireland the main driver appears not to be lower interest rates, but (at least partly) restricted supply. Market supply has never breached 20,000 units since March 2020 and in December it was just 15,390 units – 33% down on last year's already low figures, according to Daft.ie. Dwelling permits and completions in 2020 also fell by 14.1% and 2.8%, respectively.

“2020 saw unprecedented upheaval across all of Irish society, as a result of the Covid-19 pandemic,” saidRonan Lyons of Daft.ie.  “The housing market didn't escape this upheaval, with the number of homes put up for sale in the second quarter of the year down over 50%. While things improved in the third quarter of the year, as the economy reopened, the volume of listings in any given month never even matched the same month in 2019, let alone offered catch-up.

“For the year as a whole, just 49,000 homes were advertised - the lowest total in over five years.” 

Ireland house prices
The Irish economy grew by about 3% during 2020 – the only positive growth in the European Union (EU). The strong growth, despite global economic uncertainty, was mainly driven by companies nominally relocating to Ireland, such as Perrigo Co. and Jazz Pharmaceuticals Plc, attracted by the country's very open economy and low tax inversion rate of 12.5%. The economy grew an annual average of 10% from 2014 to 2019.

The economy is projected to grow by 3.4% this year and by another 3.5% in 2022 on the back of strong private consumption, recovery in investment, as well as strong exports, according to the European Commission.


Analysis of Ireland Residential Property Market »

Rental Yields

Excellent yields on small apartments in Dublin

Gross rental yields on apartments remain excellent in Dublin, in certain areas and for certain sizes. Across the range of apartment and house sizes, Dublin 1 earns the best returns. However, Dublin yields are falling as prices rise.

How much will you earn? One-bedroom apartments will earn relatively more than two-bedroom houses (in terms of return-on-investment), and those in turn will earn relatively more than 3-bedroom houses, etcetera. To earn higher returns, buy smaller units.

As is perhaps to be expected, the highest yielding apartments are those in the lowest-cost areas. It was ever thus! These areas also tend to be those where prices are least volatile, thus least exposed to a downturn.

  • In Dublin 1 a 1-bedroom apartment bought for around €215,000 can rent for around €1,530 per month, earning a yield of 8.6%. Please remember that these yields are gross; net yields will be less.
  • In Dublin 7 a 1-bedroom apartment bought for around €211,000 can rent for around can rent for around €1,470 per month, earning a yield of 8.4%
  • Large houses (4 and 5 bedrooms) tend to earn relatively low yields.

Round trip transaction costs are moderate for buyers of residential property in Ireland. See our Ireland residential property transaction costs analysis and our Residential property transaction costs in Ireland compared to other countries.

Read Rental Yields »

Taxes and Costs

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 is imposed at a flat rate of 33%. 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 33%, 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

Buying costs are moderate in Ireland

Round-trip transaction costs are around 4.94% to 13.205% of the property price. The buyer pays the stamp duty (1% to 2%), legal fee (1% to 1.5%, plus 25% VAT), and registration fee.

Read Buying Guide »

Landlord and Tenant

Strong but fair tenant protection in Ireland

Ireland has strong tenant protection laws.

Ireland Ballyroon CountyRents. 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

Irish economy continues to grow, defying the pandemic

Ireland modern houseThe Irish economy grew by about 3% in 2020 from a year earlier – the only positive growth in the European Union (EU). The strong growth, despite global economic uncertainty, was mainly driven by companies nominally relocating in the country, such as Perrigo Co. and Jazz Pharmaceuticals Plc, who are attracted by the country’s very open economy and by its relatively low tax inversion rate of 12.5%. However these corporate inversions result in little real change in output, just a change in where the legal ownership of the output is located.

When a corporation’s headquarters become resident in Ireland, all of its profits (including profits generated abroad) are counted as part of the country’s gross national income - which dramatically increases the country’s economic growth without corresponding increases in employment. Also, this increases Ireland’s contribution to the EU budget, which is based on the size of a member’s economy. The also create confusion about the real condition of the Irish economy, and increase people’s skepticism with regards to the reliability of economic figures.

Ireland GDP inflation
Nobel Prize award-winning economist Paul Krugman described a similar phenomenon as “Leprechaun economics”.

Because of this, the Irish economy grew by an annual average of 10% from 2014 to 2019.

The economy is projected to grow by 3.4% this year and by another 3.5% in 2022 on the back of strong private consumption, recovery in investment, as well as strong exports, according to the European Commission.

Overall inflation was -0.4% in February 2021, down from 1.1% in the same month last year, according to CSO. It was the eleventh consecutive month of consumer price falls. Nationwide inflation is estimated at 0.7% this year, based on EC estimates.

Seasonally-adjusted unemployment rate stood at 5.8% in February 2021, up from 5% in the previous year, according to the CSO. This is slightly higher than the average of 5.5% from 2018 to 2020 but still substantially lower than the 12.1% average unemployment from 2009 to 2017.

There were about 140,800 unemployed persons in February 2021 – an increase of 15,600 from a year earlier.

Ireland is back to deficit
Ireland’s economy has been on an unusual journey over the past decade.

Ireland had the euro zone’s highest budget deficit in 2010, at 31.2% of GDP. In November 2010 it had no choice but to seek a €67.5 billion (US$82 billion) bailout from the European Union (EU) and the International Monetary Fund (IMF). In exchange, Ireland committed to a harsh austerity program.

The country spent around €80 billion to establish the National Asset Management Agency (NAMA) to buy toxic loans, primarily to improve the availability of credit to the Irish economy, and to remove non-performing loans from bank balance sheets.

Ireland government balance budget
In June 2012, 60.29% of Irish voters agreed to the European fiscal compact of May 31, 2012, allowing Ireland to access to the European Stability Mechanism, a €500 billion (US$618 billion) bailout fund.

By 2011 the Irish budget deficit had fallen to 12.8%, and to 8.1% in 2012, comfortably within the 8.6% target set by Ireland’s international creditors: the EU, ECB and IMF. The budget deficit declined again to 6.2% of GDP in 2013. At end-2013 Ireland became the first country to exit the eurozone bailout programme.

The government’s budget balance continuously improved since. In 2019, Ireland recorded a budget surplus equivalent to 0.4% of GDP, up from a surplus of 0.1% of GDP in 2018, amidst strong economic growth and robust corporation tax payments. It was the second consecutive year of surplus since 2007.

However in 2020, the country ran a deficit equivalent to 5.5% of GDP, amidst a decline in tax receipts coupled by a surge in coronavirus-related government spending.

The deficit is expected to rise further to 7.5% of GDP this year, according to the central bank.

Likewise, gross public debt widened to 59.1% of GDP in 2020, up from 57.4% in 2019, marking the first increase since 2012, according to Fitch Ratings. The debt ratio is expected to rise further to 61.4% of GDP this year.
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