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 - 2009

The Irish housing market has crashed. Think Twin Towers. Collapsed.

From 93,000 residential units in 2006 the optimistic forecast for 2009 is 15,000 units. 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.

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 annually 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.

Of course there's more! See the Full Site.

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