The Irish Market: Are current property prices affordable?

The Irish Market: Are current property prices affordable?

Are current property prices affordable? The latest quarterly house price report released by earlier this week showed that asking prices declined by 4.1% nationally and by 3.8% in Dublin in the quarter. Median asking prices for a 3-bed semi around the country are now at €179,000, which is equivalent to around 5 times average earnings, and counties Longford and Westmeath recorded the lowest asking price for a 3-bed semi at €149,000.

It is clear that 2010 was a very challenging year for the property market and Ireland’s economy, and author of the report, Annette Hughes, Director DKM Economic Consultants said further price reductions are likely over the course of 2011. Nevertheless, for anyone contemplating buying a home, properties have never been more affordable. Property prices are now nearly half the price of what they were at the peak of the market in 2006 with better value emerging across all property types.

On the flip side, for those contemplating buying a home in 2011 there are numerous hurdles to face including, difficulties in accessing credit, the changes to stamp duty, the concern over further mortgage interest rate hikes pushing up the cost of living and talks of the abolition of Mortgage Interest Relief in the future.

Have your say:

  • The Irish Market: Are current property prices affordable?
There are 20 comments for this article
  1. RedWino at 10:24 am

    I agree with many of the above comments.

    It’s very simple for me, if I want to buy a home – and I do – a property is only affordable once the repayments on the mortgage are no greater than 2.5 the annual income of the main earner, plus the annual income of my partner.

    So, if we consider from an economic stability perspective the average family size need to be 2 children, that family needs a 3 bed home. The average industrial wage is 31-33K, so a home is only affordable at 140K assuming the buyer is borrowing 80% of the property value.

    Forget what the yield is on rent (that’s the investors game).

    You’re buying a home for life. Not a ball and chain for life. As buyers, collectively we are in comntrol – not the vendors and PR companies.

  2. Pat at 10:17 pm

    I have to agree totally with the comments from Alan Jones on the value of a house.
    I can add nothing. He has it all covered.

  3. Ja at 10:32 am

    @ #14 Seanie
    You are definitely in the minority on here ! People who are aware of how greedy estate agents acted in the past 5 to 6 years will not be rushing back into this market. We were told in 2007 that “the bottom had been reached” and that our offer of €310K on a €330K property “would be laughed at”. Said property is on offer for €250K now. I’ve driven past but haven’t quite been able to hear the laughter. As the Who put it “We don’t get fooled again”.!!

  4. Paddy Pious at 9:17 am

    This talk of a natural house price to income ratio is rubbish; the only factor determining the price of second-hand housing is supply and demand. We have only bought in a buyers market and at the right price, our first house, a 3-year old, 110m2 detached 3-bed, 2-bath on 2000m2 purchased in the 80s cost 2.5 times my basic salary and approximately 100% of our joint income including overtime and bonuses. The next a lovely 2-bed detached cottage cost 1.6 times my salary and my most recent house purchased in 2003, an original 100-year old large 3-bed detached in need of refurbishment (nothing structural) cost 6-months income to buy and another 3-months to renovate. We bought these properties while working overseas and earning a local salary. One (the 2-bed) was rented for a time and the yield was 13%.
    Irish people are so gullible with regard to what they will pay for a house, no wonder there are so many sob stories of negative equity and mortgage arrears. Never pay more than 3-times the highest salary (assuming a couple are purchasing), pay at least 20% deposit and do not take out a mortgage of longer than 20-years. If you can not get a house at this price, do not buy, rent! We currently rent a 3-bed 3-bath home in a very good area in Dublin for an annual rent of 1.2% of the price our neighbour bought for in 2006 and will buy again only when the price is right, and if they remain too high, renting remains better value.

  5. pippy at 12:26 am

    Nope… how can they be – nobody has jobs or money and more cuts to come forget it, + residential taxes and water rates looming, people are desperate to rent homes they cannot afford to keep, RENTING is the only option now ….we shall eventually be like Italy etc. NO need anymore to OWN property anymore (or should I say debt) ; (

  6. michael kennedy at 10:21 pm

    The prices of homes in Ireland are still too high and are not even worth half of what they are now valued. A house should be a home, not a commodity. People should not have to struggle all their working lives to pay for what should be a natural right. Life becomes constantly sacrificed to economics. This is no way to live. We are here to enjoy.

  7. Seanie at 9:29 pm

    Well done to all for comments. The current price of a 1,000 sq ft semi-d house, plus price of 1/12 of acre site, is currently below the current cost of construction (at significantly deflated labour and material costs). The current stock of properties is “on sale”, until the current stock depletes, with availability much less in Cork and Dublin (apartments are a different story). Once these sale properties are sold, there will be a return to supply and demand issues. The old value investor maxim “leave a dollar for the guy at the top and a dollar for the guy at the bottom”! This country is not as bad as people think! Stop waiting for properties to be given away. the current rental yield has returned to normal and more.

  8. james at 7:59 pm

    hi all the realist price of a 3bed in ireland is 150k and there are plenty of buyers. poor marketing and people selling the houses in ireland not able to speake buisness . there is a pool of buyes here in england able to buy in ireland but as the woman who was moving back to ireland with full cash price wrote in the irish post the estate agents would not bother to show up to view the house. we here have the funds to purchase houses in ireland with steady incomes. when i travel to ireland the estate agents dont want to know. and then will not encourage any price but what they are asking. when buyers do come to ireland deals can be done but the agents dont know how to one point two years ago i had a small pool of buyers willing to buy in ireland and invest for a period of time. there was no movement on the price of the houses so i told my buyers to back off. the funds were there and i was willing to act as go between but again the price were set in stone as i was told by the seller.therefore based on this story and the other buyer in the irsh post deal have been lost i personaly will not wait till 2014 to buy in ireland. but iwill not be made a fool of just because i live abroad.

  9. Fergo at 5:52 pm

    One of the main barriers to movement in the housing market is the immobility of mortgages – particularly Trackers. If you’ve got a nice tracker tied to a low Euro rate, you’d be stone mad to give it back to the bank in return for a nice high rate variable. They WOULD be pleased. So until the bansk do a deal for existing tracker mortgage holders, even if money does free up, stamp duty remains low, most tracker holders wouldn’t dream of foregoing the low rate for the unknown and definitely much higher rates.

  10. Eamon at 5:07 pm

    Alot of “facts” about historical links trotted out are pure fiction. House prices now relative to average ind. wage seem to be similiar to when I bought my house in 1978. But interest rates then were 14%. Houses now are certainly affordable,but may become even more so in a frightened market.

  11. Dannyboy at 4:30 pm

    According to the bank stress tests last Friday, property will fall by 17% this year and 18% next year.

    The latest quarterly house price report released by earlier this week showed that asking prices declined by 4.1% nationally and by 3.8% in Dublin in the quarter.

    Extrapolate going forward, and you will see that property prices will fall to 3 times the average industrial wage (31k p.a) by the end of 2012.

    When property has fallen to the 3 times the average industrial wage, it will finally be safe to buy.
    Therefore, end of 2012/start of 2013 should be the EARLIEST date which you consider buying.
    Realistically it would be wiser to wait until 2014, due to surging interest rates, property taxes, water taxes etc. etc.
    But some of us don’t feel we can wait forever – we’ve basically lost a decade of home ownership due to the boom and bust!

  12. James Coyle at 3:33 pm

    I predict that unless there’s some bank finance generally available, the price of a 2 bed apartment in Dublin will head towards 150k. We’re operating in a cash economy and the country nationally is bankrupt!
    Hold on and buy later!

  13. caroline hoary at 1:42 pm

    I would like to say that I am selling my house in co.longford a three bed semi with everything from water softening system installed shed with electricity dual heating oil and a stanley solid fuel stove also two electric showers. I put my house on the market last year for 110,000 euro but took it off the market as my daughter wanted to finish school here and it made sense. I put my house back on the market this year for 85.500 euro. The only reason I am moving is to look after a sick eldery relative. I think people are just nervous about interest rates and hoping prices drop more but to be honest how much lower can we go. I couldn’t see mortgage debt being written off but i do think that these ghost estates should be demolished

  14. Colette at 1:33 pm

    It depends entirely on where you want to buy – if you go west you can have a 2 bed house for under 100K – and in Dublin – if you are prepared to do a little spring cleaning you could own for 200K – or 150K if you are prepared renovate. Overall prices are down a lot but so are salaries and few jobs secure at the moment. If you are lucky enough to have one of the very few that are, the salary is still at risk of reduction. Yes prices are down but value? – thats all about how much someone is willing to pay. Right now very few properties are moving so I would say the answer is “probably not”.

  15. john lynch at 1:22 pm

    Houses are still too expensive. Until they drop to maximum 3 times average earnings for an average 3 bed house or apartment the majority cannot sustain payments as interest rates are now going back to ‘normal’ levels. Historically, the maximum loan was 2.5 times earnings ( and only then when it was a permanent position .How many poistions can be considered permanent now ?) . Even if houses are 3 times earnings a person will have to have a deposit of almost 20% !

  16. Tony at 1:08 pm

    Prices still not affordable in many areas.
    Basic valuation of any property was historically
    7 times the annual rent. Even allowing for 20 times annual rent due to low interest rates which is a very generous multiple,prices still end up in many cases way over inflated. Incomes shrinking, taxes increasing, mortgage rate increases, Job insecurity, Low economic activity, population to pay off bank debt over the next 20yrs,Insolvent banks reluctant and unable to lend, all this points to a continuing depressed market until prices reach affordable levels

  17. Olli Rehn at 12:53 pm

    Don’t buy preperty until 2014 – you’ll pay otherwise, you have been warned

    Olli Rehn

  18. Brian Lenihan at 12:45 pm

    House prices need to come down another 20%

  19. Alan Fox at 12:31 pm

    The question is not that are they affordable but more that are they good value? With interest rates set to go higher again over the next 12-24 months and taxes rise or tax reliefs fall and very few buyers certian of wage increases to come then what is affordable now might not be in 24 mths time if the economic downturn which shows no sign of abating continues. Just because prices fell 50% from their highs doesnt mean they wont continue to fall further. I dont recall any property sites saying is now the time to sell because the 1995-2002 prices went 100% higher. What we need to look at is Annual Equivalent Rents get Irish property prices back closer to the AER averages seen in the rest of Europe of around 16-18 times AER. Irish prices are still well above this level.

  20. Jason Berry at 12:30 pm

    Prices of houses are affordable at all price levels depending on the income available to potential buyers and the leverage banks will give them. For many people houses are no less affordable now with banks lending very little. For people with cash, it is definitely more affordable today. However, affordability isn’t the big question. The real question on everybody’s mind is “At what price does a house make financial sense to buy as opposed to rent.”

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