Irish House Prices: Why Affordability is Slipping Despite Cooling Growth
A staggering €370,000. That’s the median price of a home in Ireland today – a figure that feels increasingly detached from reality for many aspiring homeowners. While annual house price growth has held steady at 7.8% in June, according to the latest CSO figures, the persistent imbalance between supply and demand continues to erode affordability, turning the dream of homeownership into a distant prospect for a growing number of people.
The Two-Speed Housing Market: Dublin vs. the Rest of Ireland
The national average masks significant regional variations. Dublin, predictably, is experiencing more moderate growth at 6.6% year-on-year, reflecting – though not resolving – its chronic supply issues. However, prices outside the capital are surging ahead at 8.8%, indicating that the affordability crisis is spreading. This disparity highlights the need for targeted interventions beyond Dublin’s boundaries.
The highest median price remains firmly rooted in Dún Laoghaire-Rathdown (€675,000), while Leitrim offers the most affordable entry point at €190,000. This geographical divide underscores the impact of location on property values and the challenges faced by those seeking to buy in high-demand areas.
New Builds Lagging: A Critical Bottleneck
Despite a 35% increase in housing completions, the figures reveal a worrying trend: just 937 of the 4,029 homes purchased in June were new builds. This stark statistic, highlighted by Genevieve McGuirk of Ipav, casts serious doubt on the Government’s ambitious target of 41,000 new homes this year. The reliance on the second-hand market – which saw price growth of 8.8% in the second quarter compared to 4.2% for new homes, as noted by Goodbody economist Dermot O’Leary – is exacerbating inflationary pressures.
The Impact of Second-Hand Sales on Price Inflation
The dominance of second-hand sales in the overall market significantly influences price trends. With a limited supply of new homes, demand is overwhelmingly channeled into existing properties, driving up prices at a faster rate. This dynamic underscores the urgent need to accelerate the delivery of new housing stock.
Interest Rates and Economic Factors: A Complex Equation
While the European Central Bank (ECB) paused its rate easing cycle in July, expectations of at least one further cut in 2025 remain. Lower interest rates, while potentially easing the burden of mortgage repayments, can also fuel demand and contribute to further price increases. This creates a delicate balancing act for policymakers.
Government incentives to buy, coupled with the ongoing supply shortage, are also key drivers of house price inflation. The interplay of these factors creates a complex equation that is proving difficult to solve.
Looking Ahead: What’s on the Horizon for the Irish Property Market?
The current trajectory suggests that affordability will continue to deteriorate unless significant changes are implemented. A sustained increase in new housing supply is paramount, but this requires addressing planning bottlenecks, streamlining construction processes, and incentivizing developers. Furthermore, a more nuanced approach to Government incentives may be needed to avoid simply inflating demand without addressing the underlying supply issues.
The long-term impact of remote working on housing demand also remains to be seen. While it may alleviate pressure in Dublin, it could simultaneously drive up prices in commuter towns and rural areas. Understanding these evolving dynamics will be crucial for effective policy-making.
Trevor Grant, Chair of Irish Mortgage Advisors, succinctly captures the sentiment: “The biggest driver of Irish house price inflation is the shortage of homes coupled with the pent-up demand for housing and an expanding population.” This fundamental imbalance is unlikely to resolve itself without decisive action.
What are your predictions for the future of the Irish property market? Share your thoughts in the comments below!
