Irish property prices now falling
Daragh Cassidy
Head Writer

The latest data from the CSO shows property prices are now dropping as interest rate rises impact the market.

Property price growth has slowed dramatically over the past year in Ireland and prices have now been falling in most areas for the past few months. That's according to the latest data from the Central Statistics Office (CSO).

Despite most estate agents insisting that prices will continue to increase, the outlook is for prices to fall this year for the first time since 2012.  

Let’s take a look at what the data is telling us…

Falling prices

Prices in Dublin fell 0.9% in March compared to February and are now down 2.6% over the past three months alone. Prices in the capital have actually been falling since last October. However, prices are still up 1.7% compared to March 2022 but it’s highly likely that we’ll see negative year-on-year growth before the end of the summer. Indeed houses in Dublin city centre are already down 1.2% over the past 12 months.    

Property prices outside of Dublin have held up a bit better. They fell 0.4% in March following small month-on-month drops in January and February. This has left prices down 0.7% over the past three months. Prices are still up by a fairly hefty 5.7% compared to this time last year. But it’s likely we’ll continue to see prices outside the capital fall for the rest of the year.  

Dublin property prices are now 8.7% lower than the peak they reached back in February 2007, just before the Celtic Tiger crash, while prices in the rest of the country are 2.1% higher than their May 2007 peak. But it's likely prices outside Dublin will also fall below their peak over the coming months.  

The median or mid-point price of a home in March was €310,000. The lowest median price was €154,000 in Longford while the highest was €635,000 in the Dublin constituency of Dún Laoghaire-Rathdown.

Why are property prices falling?

We’re constantly told that there’s a huge mismatch between housing supply and demand in Ireland, which is forcing prices up.

And while that’s still true, the huge increase in interest rates that we’ve seen since last July has impacted the property market.   

Since last July the European Central Bank (ECB) has rapidly hiked its main lending rate from 0% to 3.75%. And around half of this increase has been passed on to new mortgage customers by the main lenders. With more to come.  

This means that the cost of repaying a mortgage has increased considerably and this is affecting how much people can borrow and therefore reducing house prices.

For example, a typical first-time buyer or mover borrowing €300,000 over 30 years could have got a mortgage rate around 2% until the middle of last year. This equates to a repayment of just under €1,109 a month. 

However rates are now approaching 5% with some lenders. If someone borrowed the same amount at this rate it would cost an extra €500 a month. Or, to keep the same repayment amount as last year, either house prices or the amount borrowed would have to drop by over 30%! 

So you can see why prices are now falling. 

The impact that rising mortgage rates would have on property prices was flagged by earlier in the year and we’ve been forecasting for several months that prices would drop this year - despite most estate agents and business commentators saying otherwise. You can read more on that analysis here.

What’s the forecast for the rest of the year?

The ECB is expected to keep hiking rates for the next few months. 

Its main lending rate is now 3.75%. This is the rate trackers and mortgages are priced off. And this is expected to increase to 4.25% by the end of the summer and then stay there for several months as the ECB tries to tame inflation, which is still running well above its 2% target. 

This means the cheapest mortgage rate for most first-time buyers and movers is likely to be well over 5% soon. 

This means property prices are likely to continue to fall.

Prices in Dublin could fall by around 5% this year and a further 2% or 3% next year. Prices outside Dublin might hold up slightly better but will also fall. 

However the drop in prices doesn’t mean affordability for prospective buyers will improve as the relatively small drop in prices will be outweighed by the large rise in mortgage rates which will make repayments much more expensive.

Should we be worried by falling prices?

Many of us are still probably scarred by the property crash of 2008 which ruined the economy, left employment near record highs for several years, and left the Irish taxpayer with a bill for tens of billions of euro to bail out the banks.

But things are a lot different this time.

Irish property prices are nowhere near as overvalued as they were in 2007. The Irish banks are way better capitalised. And the Central Bank's mortgage lending rules mean Irish homeowners are nowhere near as over stretched financially as they were at the height of the boom. Besides, never-ending property price growth which puts home ownership out of the reach of a younger generation isn't a good thing. 

In short, an easing of prices is to be welcomed.

Also, if you recently bought a home and have no plans to move for a few years, a small drop in house prices shouldn't affect you as long as you can continue to make your monthly repayments and you'll be paying down your capital. And if you bought your home a few years ago (from 2012 onwards) you'll still be in positive equity. 

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