Ireland Residential Real Estate Market Analysis
Lalaine C. Delmendo | October 06, 2022
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.
All of the country's major counties experienced strong house price rises during the year to Q2 2022.
- In Dublin City Centre, the average asking price rose by 6.3% to €370,173 (US$362,740), according to Daft.ie's Q3 2022 House Price Report.
- North Dublin City's average asking price rose by 5.6% y-o-y to €389,981 (US$382,150).
- North County Dublin's average asking price rose strongly by 9.6% y-o-y to €380,013 (US$372,382).
- South Dublin City's average asking price increased 6.2% y-o-y to €469,065 (US$459,646).
- West County Dublin's average asking price rose by 7% y-o-y to €351,682 (US$344,620).
- South County Dublin's average asking price was up by 4.9% y-o-y to €654,207 (US$641,071).
Outside Dublin, average residential prices soared 15.25% (5.65% inflation-adjusted) y-o-y in July 2022, according to CSO.
- In Cork City, Ireland's second largest city (located in Munster, in Ireland's south), the average asking price rose by 7.6% y-o-y to €332,125 (US$325,456) in Q2 2022.
- In Limerick City, Ireland's third most populous city, the average asking price rose by 8.9% y-o-y to €251,448 (US$246,399) in Q2 2022.
- 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 sharply by 11.6% to €354,569 (US$347,449) in Q2 2022 from a year earlier.
- In Waterford City, also one of Ireland's bigger cities, the average asking price increased 11% y-o-y to €228,487 (US$223,899) over the same period.
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 September 2022, it was just 15,461 units.
The supply situation outside Dublin is worse. “While Dublin has seen repeated cycles in availability over the past decade, for the rest of the country, it has been a period of steady falls in availability, from extraordinary gluts in late 2010 to acute shortages in early 2022: from over 55,000 homes to just 7,300 homes in early 2022,” said Ronan Lyons of Daft.ie.
Demand remains healthy. The total number of market-based household purchases of residential dwellings in Ireland rose by 3.6% y-o-y to 24,608 units in the first seven months of 2022, following a 22.2% growth during the whole year of 2021, based on figures from CSO.
However with interest rates rising and high inflation sharply reducing the purchasing power of households, housing demand is expected to slow in the coming months.
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.
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.
How much do apartments cost? Dublin's average apartment prices tend to be approximately around EUR 200,000 (for a 1-bedroom apartment).
- In Dublin 1, a 1-bedroom apartment typically costs around EUR 239,000 and can be rented out at EUR 1,586 per month, earning a rental yield of 7.96%.
- In Dublin 3, a 1-bedroom apartment typically costs around EUR 280,000 and can be rented out for EUR 1,505 per month, earning a yield of 6.45%.
- Dublin 6W is somewhat close to apartment prices in Dublin 3. A 1-bedroom apartment costs around EUR 290,000 and can be rented out for EUR 1,497 per month, earning a yield of 6.19%.
- In Dublin 7, apartment prices and rents are cheaper than the areas mentioned above and with surprisingly higher returns. A 1-bedroom apartment costs around EUR 232,000 and can be rented out for EUR 1,469 per month, earning a yield of 7.60%.
- In Dublin 8, a 1-bedroom apartment costs around EUR 242,000 and can be rented out for EUR 1,497 per month, earning a yield of 7.42%.
You can generate higher apartment yields in low-cost areas such as Dublin 1, where you can earn a rental yield of 7.96% for a EUR 239,000-worth one-bedroom apartment. And an excellent yield of 7.60% for a one-bedroom apartment in Dublin 7. (Please remember that these yields are gross; net yields will be less). Large houses (4 and 5 bedrooms) tend to earn relatively low yields.
Round trip transaction costs are high for buyers of residential property in Ireland. See our Residential transaction cost analysis for Ireland.
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.
rish economy continues to grow, finances improvingIreland’s economic growth accelerated to 13.5% y-o-y in 2021, buoyed by the exceptional performance of multinational sectors, particularly information and 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%.
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.
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.
In fact in 2020, Ireland still managed to register an economic growth of 5.9% - the only positive growth in the European Union (EU).
Ireland’s economic growth is expected to continue expanding, albeit at a slower pace, amidst deteriorating global outlook, persistent inflationary pressures, and weakening sentiment. The European Commission projects a real GDP growth rate of 5.3% for Ireland this year and 4% in 2023.
Overall inflation stood at 8.7% in August 2022, easing from the 38-year high of 9.1% in the two prior months but still sharply up from just 2.8% in the same period last year, according to latest figures released by the CSO. Inflation averaged just 0.3% from 2010 to 2020 before rising to 2.4% in 2021.
Ireland’s labour market continues to strengthen. In September 2022, the seasonally-adjusted unemployment rate stood at 4.3%, unchanged from the prior month but down from 5.2% a year earlier, according to the CSO.
“The rate of 4.3% in September 2022 was lower than the pre-pandemic level of 4.9% recorded in September 2019. The unemployment rate for males was 4.2% and 4.3% for females in September 2022,” said the CSO.
There were about 116,900 unemployed persons in Ireland in September 2022.
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 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.
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 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 0.5% 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 5.1% of GDP, amidst a decline in tax receipts coupled by a surge in coronavirus-related government spending. The government was able to bring back its shortfall to just 0.1% of GDP in 2021, amidst improving economic conditions. The country is expected to return to a budget surplus this year.
Ireland’s gross public debt fell slightly to 56% of GDP in 2021, from 58.4% of GDP in 2020.