A Long Look at Ireland: 4. Where People Live
Ireland has a long tradition of home ownership, as distinct from long-term rental, and 78% of households still live in homes they own (or at least on which they are paying a mortgage!).
As the graphs on the right clearly show there has been an explosion in home building over the last decade. More than a third of all homes in Ireland were built in the last 12 years, a remarkable figure. This has not, as might be expected, led to reduced prices. In fact the opposite is the case, with prices rising fast and seemingly inexorably between 1996 and 2006.
Who is buying all these houses?
It can sometimes be difficult to see where this unending demand is coming from. Yes, the population has grown, but while in 1992 there was one house built for every 150 people in the country, in 2004 this had jumped to one for every 50 people.
One reason for the increase has been the lower age of the population; the increased numbers of young people now staying in Ireland instead of emigrating, and of young immigrants moving here to work, need somewhere to live.
Another factor is the growing popularity of second or holiday homes, a relative rarity until recently. While many Irish people now have overseas home, many more buy second homes close to the coast, and popular coastal regions have seen prices soar by as much if not more than those in cities.
Buy to Let
There has also been a massive increase in the number of people developing small property empires. It is now very common for those lucky enough to have started climbing the property ladder early to use the equity built up in their homes to buy 2, 3, 4 or more properties as investments, to be rented to those struggling to find the bottom rung.
This seemed in the years of soaring prices to be a no-brainer, with the contantly increasing house prices apparantly garaunteeing a fast and generous equity return to those buying homes to let. Banks were generous with their lending, capital gains taxes were lowered, interest rates were low. What could go wrong?
A Property Crash or a Soft Landing?
Typical suburban houses in IrelandThose who believed that the upward trend in house prices could never end were always deluding themselves, and reality began to dawn in early 2007. To December 2007 prices had dropped by an average of 7%, with many warning that there was more to come.
Even that doesn't tell the whole story. The fall in numbers of sales in 2007 has been even more significant, with lowered prices failing to attract buyers into a market of rising interest rates and much uncertainty about the future. Housing developments are dotted with for sale signs and one mid-sized estate agent I spoke with recently admitted that his company were hardly selling anything at all. Houses that once would have been snapped up in days are languishing on the market for months.
During the census of 2006 enumerators found that a startling 20% of houses in Ireland are unoccupied. While some were undoubtedly second homes or had owners who were away, most are investment properties, bought in places where rental demand is not high and sale at a profit is no longer an option.
The optimists are still predicting that the market will stabilise in 2008, but there are many more predicting further falls. For the moment developers are not dropping prices, though they are offering carrots like mortgage free periods or enhanced finishes, but they cannot afford to retain already completed housing stock forever.
Certainly there are interesting times ahead for those watching the Irish property scene.
Enjoy this Article? Tell a Friend! | Bookmark This Article:
