Irish Housing Overview
Overview and Background
Ireland has the highest per capita home ownership rate in the world at nearly 85%. The tradition in Ireland has always been to build or buy a home and live there all your life. Only since the 1990's has this "build for life" ethic started breaking down. For the first time, moving around to get better jobs and moving up to get better homes has become common.
You don't need to be a citizen to buy land or a house in Ireland. As for building a new house, many counties are being very stringent about allowing non-locals to build new houses in green field sites in the countryside. Buying an existing home raises NO such problems - you can buy existing country homes without any planning permission.
I've been covering the housing market in lots of news articles, so I'd suggest looking there for articles on boom-bust possibilities, government responses to the problem, and the like.
The summary is this: the country is in the aftermath of its greatest economic boom since the first hollowed out log arrived in-country about 12 millennia ago. House prices rose accordingly. An annual immigration of up to 70,000 mostly affluent immigrants to Ireland boosted prices, as did two income families. Dublin sprawled outward and anyplace within an hour's drive experienced significant inflation. The rest of nation followed the upward path.
Since 1995, house prices trebled or even quintupled. In Dublin, many rose by even greater multiples. Building costs, by contrast, rose only by 75%. Ergo, someone was pocketing a bunch of loot. Hmmm? Who could that be? It's no wonder builders and investors swelled the building rate to 93,000 units in 2006.
Housing - 2010
The Irish housing market could not defy reality forever. Eventually, it crashed. Think Twin Towers. Collapsed.
From 93,000 residential units in 2006 the optimistic forecast for 2010 is 8,000. By units, they mean apartments as well as houses and vacation homes.
Mortgages have tightened. 100% mortgages are impossible to find and downpayments of between 10% and 20% are standard once again.
The financial credit crunch means that the banks aren't lending and when they do, they have to pay a premium rate when they go to refinance their own portfolios. Guess who pays that higher rate in the end? Yep, you do, right smack in yours!
How Much Lower
Will prices go lower? Well, they won't be going higher soon and all the indicators and experts predict that they've got a way to go before any rebound. So, finally, the buyer is king - if the king can convince his banker to give him a loan.
But, even if the banks rate you a triple AAA risk, no one is buying. The estate agents keep talking about "great value out there" and compare previous asking prices to current ones. So, dinky places needing work that are in bad locations have fallen from €450,000 to €325,000 and that's supposed to be great value.
My own call is that houses are overpriced till the average punter can afford one. Historically the ratio is three to four times annual family salary for a house.
Since Ireland is going through rapid deflation, it's hard to know where things will settle. But, it is a sure bet that prices will continue to drop until the news turns good. Prices in Dublin have dropped 42% from their high and between 20% and 40% throughout the rest of the country. Many experts predict a final fall of 50%.
Invest now at your peril - unless a truly affordable price is quoted. Another way to guage an asking price: if you're spending more than about 30% of family income on your mortgage, then history tells us you're probably going to regret your purchase.
It'll be a long, long time before housing prices go nuts again.
All those people who can't sell their houses have put them on the rental market.
When Ireland was booming, hundreds of thousands of Eastern Europeans and immigrants from around the planet poured in. Ireland's population rose and all those newbies needed someplace to live. With the economy in reverse, an estimated two thirds of the recent migrants have returned home.
Put the two trends together. Tthere's a greater supply of rental properties and less demand. Result? Rental prices have also dropped.
So, how low can prices go? For less desirable rentals in less desirable locations, they'll drop plenty. For city centre locations, demand will always be strong.
Follow the rental market via the biggest and best of the Irish rental sites - daft.ie
The Two Cents Shpritz of Advice
From the February 2010 Newsletter:
A smattering of economists are predicting that the property market might turn this year. They cite bargain hunting German investors looking at highest end, income generating properties. Dublin prices have fallen more than 42pc since the madness peaked back in 2006. Countrywide, prices have dropped between 20 and 40pc.
Bargains! They say. And estate agents report that house viewings are strong and that people want to buy.
BUT… BUT… BUT…
BUT the banks aren't lending and prices are still dropping. According to the Taoiseach/Prime Minister, about 100,000 homes will come on the market this year, but there is only demand for 25,000. And that's not counting all the tens of thousands of home owners who haven't bothered putting their empty homes on the market because the prices are too low and they're waiting for a turnaround. The latest report puts the number of empty homes at 300,000, double the official figure. This doesn't even count empty rental apartments or holiday homes. At current rates of demand it'll take 12 years to clear the backlog, so long as no one dies, divorces or for any other reason puts another home on the market.
BUT the European Central Bank has announced it will be raising interest rates over the next year. And another 75,000 jobs are expected to be lost this year. Though the economy's rate of decline has slowed, she ain't hit bottom yet. Incomes are still falling. One in five renters and mortgage holders having difficulty meeting payments several thousand are in arrears. Until people feel secure about their jobs - ditto the banks - no one will be buying.
BUT the government has promised to examine taxing "principal" homes. There's a minor tax on second homes now, but property taxes on all homes are a tempting target for a government that’s already proved willing to sell its citizens to the bankers.
Nonetheless, if you've got your head up your BUT and are absolutely determined to buy, then I offer these guidelines.
Don't worry about rapid price increases. The easy credit that inflated the last bubble has been terminated. Hasta la vista, baby.
I've watched several of these boom-bust cycles in Southern California and they're always the same. It takes a while for the number crunchers to invent the next “new paradigm” which conclusively proves it will be different this time. Then the “smart money” piles in. News articles appear about the huge sums these lads are making and the local shoe shine boy gets into the act. Valuations rise, everyone’s a genius and then… splat!
Don't even think about it unless you or your partner have a guaranteed income which can cover the payments even with another 10 to 20pc cut in wages and with the increased taxes and higher interest rates which will surely come. Do not count on two full salaries forever and ever amen.
Use the traditional standard. You can only afford a house if monthly payments are between one third and one fourth of your net income. Or, the total price should be no more than 2 and 1/2 times the annual salary of the household's bigger earner plus 1 times that of a household's second earner. By this measure, most house prices in Ireland are still miles too high! The average sale price nationwide is 242,000 Euro whereas they should be in the mid hundred thou range.
Make sure the home is energy efficient because the days of cheap oil are finished.
Bargain! Thousands of repossession notices are ‘hitting home’. Remember, only one in four homes on the market will sell - and behind those already on the market swells a tsunami of empty houses.
Most important, think of a house not as an investment but as a place you really, really want to live. Make sure it's in a neighbourhood you really, really love.
Because once you put your money down, you're stuck. You do not want to join the sorry ranks of the hundred thousand other home peddlers. Their mournful chorus wafts o'er the land: "I Cocked up. The banks took me for a Muscle head. Skint Alive, Alive-O."
Here are two older articles that point out how we got into the present mess.
I cover the housing market
regularly in the monthly newsletters. You'll note that when the banks and regulators were thinking only of the next election and their bonuses, I was correctly calling the bubble. And I don't claim to be an economic guru. It really was that obvious, but when the greed heads raking it in insist on keeping their eyes wide shut, you end up with the present mess.
Skip the next two articles if you want to forgo the pleasure of reading
my pellucid prose, my dulcet dithers, my provocative prattle.
One in Five Houses Vacant - December 2006
Twenty percent of homes built in the past four years remain vacant. That’s an amazing statistic. How have prices continued to rise while one in five homes sits vacant?
What’s going on reveals classic boom psychology. A renter brings in only about 1,000 euro per month, but capital appreciation on those bare homes has been worth 4,000 per month. And renters are messy, they take leases for 6 months and they ruin the lovely, untouched emptiness.
So many new properties are empty that rents on the remaining places are rising rapidly. Dublin city centre has seen a 10pc rise in rents this year.
This overhang of vacant dwellings represents, to my mind, a huge danger when the tide turns. When the onward and upward game ends, some overextended borrowers will dump these vacant homes and their huge mortgages. The banks have been using empty properties as collateral for mortgages on new properties. What happens when the whole teetering structure runs out of steam?
But, then, I’m just the poor schnook who never invested in any Irish property but my own house.
5 Million People and the Housing Market - February 2005
In 2004 the Republic of Ireland passed the milestone figure of 4 million people. Already they’re talking about reaching 5 million within the next 10 to 15 years. Inward migration will be the principal cause of this growth – from the east, from the west and probably Antarctica too!
A million more people gotta live somewhere. So, even the housing pessimists are starting to raise their estimates of the market.
There are three things underpinning this everyday-over-the-rainbow market.
- Good economy – two income families are feeling secure and buying in. Anything to get a foot on the ladder.
- Good interest rates – Germany and France continue to languish and the low dollar is pouring on the pressure so rates remain low in the hope of stimulating something approaching growth in the EU.
- Good demographics – 50,000 of us immigrants in the last year and loads of youngsters hitting prime house buying age.
After the Bubble Note: once the economy plummeted, 2/3rds of those recent immigrants returned home. Prices are back to 2003 levels and continuing to drop. It's predicted that before the bottom hits some 350,000 mortgages will be in negative equity.
So much for "over-the-rainbow" markets.
Building a Home - The Short of It
One subscriber, J.F.,
sent me an e-mail that succinctly describes the Irish house buying experience.
This just begs to be shared.
"I look forward to all
your tips on how to how to circumvent/survive charming but sharp 'auctioneers',
relaxed but incompetent solicitors, enthusiastic but invariably absentee builders,
in short the maddening but, in the final analysis, utterly beguiling Irish
There it is in a half-built
Help - You Can Get It
There are dozens of available about building
in Ireland, with plans, costings, and pictures. This section is not intended
to serve as such an inclusive guide, but rather to provide a jump off point
and summary of the housing situation in Ireland. Consider this a disclaimer.
Much of the advice given here results from personal experience, but you'll
need professional help!
Farrel suggests taking a look at irishbuildingindustry.ie for extensive listings of
Architects, Building Contractors, Sub Contractors, Suppliers, Consulting Enginers, Civil Engineers, Etc.. in the building trade.
You can also try completehome.ie which is a new site billing itself as a one stop shop for all home needs. It's a good'un and highly to be recommended. Among other things, it lists thousands of home professionals by county.
The term Auctioneer means someone who deals in property. A very few autictioneers actually run auctions where bids are taken - for houses, for the contents of houses, for antiques and the like. But, auctioneer is a generic term and includes the much more numerous people who deal only one on one with prospective buyers. For bidding wars, specialists will be hired in for the day.
Will you be able to understand the patter? The auctioneers definitely do their auctioneering thing, but they are not incomprehensible. So the patter, in clear English, except for the occasional showy riff, goes something like "I have a bid of 100,000 - Do I hear 110? 110 - 110 - Do I hear 110? 110 - Do I hear 115?" It can be fairly fast, but it's not the movie sort of thing. Attend a cattle mart where the farmers all know the obscure lingo of the auction and you'll find it incomprehensible. But, the property auctioneers know they're dealing with normal folks. Don't worry - except for those of you who still find all Irish accents incomprehensible. If you can't understand the difference between "hello" and "sold for a quarter million euro!" I'd advise you to avoid bidding auctions.
Auctions are becoming ever less important for standard residences. Only for special properties - ones going for a LOT of money, particularly commercial properties and farm sales - are auctions still common. Even when a property is slated for auction, very often it is withdrawn because a person makes a private offer which is accepted before the auction date.
The websites I recommend are all run by auctioneer/real estate houses. You might start with the web site, but ultimately you'll be dealing with a live person who works in an auctioneering firm.
Sale by private treaty means simply a normal sale such as is common in the US and most other parts of the world. Auctioneers will probably be involved, but every once in a while the whole thing is handled privately and only the attorneys for the two parties get involved. The attorneys usually handle all conveyancing. Either way, private treaty just means that it's not going to auction. Like I said, this has become the standard method of dealing with residence sales.
Bed Sizes - A Warning for Americans
Bed sizes in Ireland are the same as in the US for singles and doubles. However, the Irish King Size bed is really an American Queen. And that's as big as she goes except for some custom made furniture.
Master bedrooms in Ireland - even in almost all the big new homes being built - are usually much smaller than their American equivalents. Fitting an American King size bed in most Irish homes means sleeping in the living room. (Which is called the sitting room over here - so no lying down on your king size bed allowed!)
Of course there's more! See the Full Site.