Housing prices in Ireland have been rising at a shockingly fast pace. In April, housing prices increased at an annual rate of 4.5 percent. This is the fastest growth rate in housing prices documented over the past 2 ½ years in the country. Over a twelve-month period lasting until the end of April 2021, Dublin housing prices increased by 3.5 percent while prices outside of the city rose 5.4 percent.
From the beginning of the pandemic, it was expected that home prices would actually go down. However, factors such as heightened savings, remote working, and citizens returning from London after Brexit were not accounted for and have provoked these rises in prices. Another major factor is the pause of construction work at the beginning of the pandemic, which has significantly impacted the supply of new houses.
Along this line, 85 percent of homes that have been purchased were existing properties while only 14.7 percent were new. Over the last year, households have paid a median of €265,000 for their homes in the Republic. The highest-priced region has been Dublin with a median price at €390,000.
Dermot O’Leary, Goodbody economist, has stated that his firm is predicting house price inflation to be 5 percent this year. The low levels of property supply paired with an already steep demand place increasing pressures on home prices. Due to continued imbalances of supply and demand, many are predicting that housing prices will continue to increase over the upcoming months.
The Central Bank has also warned about “significant house price growth” for the next couple of months. Though the forecast for Ireland’s economy has seen improvements due to effective vaccine rollout, economic recovery will still be a struggle for many. Though monetary measures taken by the government were necessary to protect the economy from the shock of the pandemic, they have also prompted higher rates of risk-taking in markets.
These factors led to a possibility for a quick financial market correction, which would provoke a tightening of international financing conditions. The results of a correction may be unfavorable for Ireland, especially if magnified by government borrowing from the pandemic. Recovery of the economy is predicted to be uneven amongst different countries and industries.
As industries return to pre-pandemic conditions, it is hopeful that the balance of supply and demand within the housing market will become more regular. Once supply and demand is back in balance, the rate of home price growth should revert to a more normal rate of growth. For the time being, however, it seems that these housing price inflations will continue to exist for at least the coming year.
Burke-Kennedy, Eoin. “Strong House Price Growth Likely to Continue for Next Year or More, Central Banks Warns.” The Irish Times, 16 June 2021, https://www.irishtimes.com/business/economy/strong-house-price-growth-likely-to-continue-for-next-year-or-more-central-bank-warns-1.4594951.
Burke-Kennedy, Eoin. “Housing Prices Grow At Fastest Level Recorded in More Than Two Years.” The Irish Times, 16 June 2021, https://www.irishtimes.com/business/economy/house-prices-grow-at-fastest-level-recorded-in-more-than-two-years-1.4594912.