Ireland’s property market has rarely been out of the headlines over the past 18 months, as its highs and lows pushed new boundaries. It would seem, however, that after a long period of misery, the country’s once-booming market is now comfortably in recovery mode.
Throughout the country there has been a visible reversal in the price declines experienced a few years ago – when the value of the average home dropped by half and homes were being sold off at distressed property auctions sporting 90 percent discounts. Moreover, Ireland’s price hikes surpassed the significant growth witnessed in Turkey, Dubai, and the United Kingdom, according to Knight Frank’s December 2014 global property index. In fact, the island’s annual growth rate hit 15.5 percent in the 12 months to January 2015 while in the capital, Dublin, prices increased 21.6 percent compared to the previous period.
But while the current pattern of growth seems to echo the pre-crash boom period of 2007-08, there are significant indicators that things will be different this time around.
During the property bubble years that culminated in the 2008 crash, price growth was driven primarily by speculators amidst an environment of easy credit offered by Irish banks. Nowadays, the wave of investors are mainly first-time buyers and other homeowners looking to upsize, and subsequently the majority of homes acquired are being used as primary residences, as opposed to the speculative investment purchases that characterised previous years.
Changes in Ireland’s banking system have also significantly curbed speculation. In the early to mid-2000s, mortgages were granted with alarming ease, but nowadays, with balance sheets still in recovery mode from the last crash, banks are far more restrictive in their lending practices. The government has also stepped in to shore up the market, introducing strict regulations that lenders are forced to abide by; banks, for example, are now only permitted to grant mortgages up to 80 percent of the total home price.
Although these interventionist measures are designed to protect lenders, they have also stymied the number of first-time buyers entering the market and slowed the rampant growth rates witnesses in 2014.
The scheme, however, is pushing up rents as prospective homeowners are forced to stay in the rental market in order to save significant deposits, triggering an increase in buy-to-let investors drawn by commensurate high rental rates. And while price growth may have slowed, the regulations have done little to alleviate the demand for homes.
Limited supply in the last two years, caused by the financial crash, has also had a detrimental impact on construction companies and the industry as a whole; with firms going bust, hundreds of thousands of skilled construction workers have left the country and emigration numbers hit levels not seen since the Great Famine of the 1840s. As a result, prices are expected to keep increasing albeit (in light of government and Central Bank measures) at a slower, steadier rate.
The deliberate suppression of domestic demand, coupled with the struggling euro, has opened the door to overseas buyers with the British leading the charge. Graham Murray, director of residential at Savills, explains: “Over the past year, we have seen good demand from international buyers, primarily from the UK, for family homes at the middle to upper end of the market in well-serviced suburban locations along the coast and close to Dublin city centre.
Highlighting a trend that could be a prominent feature this year, Murray added: “Many of these buyers are expats living in the UK now looking to take advantage of the value in the market in anticipation for their return home. In most cases, they are looking for homes in locations near to where they grew up so they can be close to family and friends again.”
And there is still plenty of growth to come. Dublin housing and apartment prices, respectively, remain 37 percent and 44 percent lower than they were at their peak; outside of the capital, residential property prices are still a full 42 percent lower than the highs of 2007.
As expected, Dubliners, residents of the energetic capital with a string of cultural attractions, and a lively nightlife, are leading the charge. With an array of traditional, small-sized apartments in the city centre to choose from, and the occasional unusually spacious unit –such as a three-bedroom, 205-sqm former twin penthouse in the Adelaide Square area of Dublin 8, with a 60-degree view of the city and the Dublin Mountains, for a reasonable EUR1.2 million (USD1.35 million) – they are spoilt for choice.
There is, however, far more to Ireland than its capital, both in terms of liveability and investment potential. “Prices outside Dublin have been rising at an accelerating rate for the last nine months,” notes John McCartney, director of research at Savills Dublin.
In County Wicklow, located in the Mid-East Region and directly adjacent to Dublin’s southern border, homebuyers can find a three-level, five-bedroom home for EUR1.5 million (USD1.69 million). Situated in the Ashford area of the ‘Garden of Ireland’ county, the modern, luxurious home dubbed ‘The Danes’ sits on a 19-acre property and overlooks the Irish Sea as well as the rural countryside.
Another notable country property on the market can be found in County Meath; traditionally regarded as Dublin’s commuter belt country. Located near the town of Navan, the Mount John House is an early 18th century Georgian mansion built on 120 acres of parkland, paddocks and mature woodland. The main home, which is 60 kilometres from central Dublin, includes nine bedroomms and various recreational rooms, and two wine cellars, and is being sold for EUR4.15 million (USD4.67 million).
Ireland’s return to a positive price growth cycle, despite being lower than the pre-crash peak, has inevitably reignited the interest of domestic and international investors, and sellers are once again confident that there will be profitable movements for the existing housing supply, in Dublin and the countryside.
Savills’ McCartney believes that “this is set to continue as demand is attracted into the commuter counties by more affordable prices and a greater supply of traditional family housing.”