House prices continous to accelerate
Lalaine C. Delmendo | February 25, 2022
- End of terrace house apartment in Cork. Price: 750,000€ / Yield: 11%
- Semi detached house in Kerry. Price: 270,000€ / Yield: 8.75%
- End of terrace house in Dublin. Price: 2,450,000€ / Yield: 7.27%
- Semi detached house in Dublin. Price: 3,200,000€ / Yield: 6.50%
- Terraced house in Dublin. Price: 2,200,000€ / Yield: 7.50%
Market overview
Ireland's house prices continue to accelerate, amidst strong demand and tight supply. In July 2022, the national residential property price index rose strongly by 13.1% (3.67% inflation-adjusted) from a year earlier, up from a y-o-y increase of 8.48% in the same period last year, according to the country's Central Statistics Office (CSO).
This is supported by latest figures from Ireland's largest property website Daft.ie, which showed that the nationwide average house price rose by a robust 8.28% to €311,514 (US$305,259) during the year to Q2 2022.
Ireland's economic growth accelerated to 13.5% y-o-y in 2021, buoyed by the exceptional performance of multinational sectors, particularly information/communications technology firms, pharmaceutical, and med-tech manufacturing companies, which are attracted by the country's very open economy and by its relatively low tax inversion rate of 12.5%. In 2020, economic growth slowed to 5.9% - but still the only positive growth in the European Union (EU). The economy grew by an annual average of 10% from 2014 to 2019.
The Irish economy is projected to grow by 5.3% this year and by another 4% in 2023, according to the European Commission.
Analysis of Ireland Residential Property Market »
Higher yields on small apartments in Dublin
The Gross rental yield is the rent the landlord will earn - before taxation, vacancy costs, and other costs - compared to the property's purchase price.
In Dublin, specifically Dublin 1, Dublin 3, Dublin 6W, Dublin 7, and Dublin 8, gross rental yields range from 6.19% to 7.96%, which are generally considered excellent yields. One-bedroom apartments will earn relatively more than two-bedroom apartments (return-on-investment). To earn higher returns, buy smaller units.
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.
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.
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.