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Irish real estate market growth slowed by Central Bank restrictions

By Mike Wheatley | January 11, 2016

The Irish real estate market experienced a healthy looking uplift in 2014, but slowed a little during 2015. In particular prices for residential property in Dublin actually decreased by 1.3% in November 2015, although they remained 3.3% higher than 12 months previously.


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Comparing prices now to the boom time of February 2007, they have fallen by 35.8%. That’s not to say that the real estate market is not still in relatively good health. Outside of Dublin, residential property prices in Ireland were 9.2% higher in November 2015 than they were in November 2014.

In some areas of the country, especially Cork, property demand is now outstripping supply which has led to price increases in the city of as much as 10%. There has also been an increase in prices in the rental market in the area; caused by the fact that for every one buy to rent investor that has entered the marketplace two have left. Although the prices of houses and apartments in many areas continue to rise, the rate of residential real estate price growth has slowed. A major reason for this is the restrictions imposed by the Central Bank.

How do the Central Bank restrictions have an effect?

Despite predictions that the Irish mortgage market would revive in 2015, this failed to happen. In fact in November 2015 the number of mortgages approved fell by 8% year on year. The fall in the mortgage market has been somewhat offset by homeowners moving their mortgages to another provider in order to secure a more appealing rate. The problems have arisen from the amount of potential residential real estate purchasers who have been adversely affected by the Capital Bank restrictions.

These restrictions mean that mortgages are restricted to 80% of the property value, meaning that buyers are faced with having to have a 20% deposit to put down. The restrictions also mean that the maximum amount purchasers can borrow is 3.5 x income. Many in the industry are calling on the Central Bank to loosen its restrictions, potentially raising the maximum borrowing amount to 90% and 4.5 x income. This would enable many buyers to escape the rental market and enter the real estate purchase market.

The central banks rules on high loan to value mortgages, which apply to first time buyers and properties valued at over €220,000, have had the most significant impact in the Irish capital. The reason for this is clear; affordability is most stretched in Dublin which results in higher levels of rejection. The problem is not as apparent in other areas of the country, where affordability is not as much of a hurdle at present.

What does the future look like for Irish real estate market growth?

There is no doubt that growth in Irish residential real estate prices slowed in 2015 and that growth in mortgage approvals fell from more than 60% in the first quarter of 2015 to a negative figure by the year end. Despite that, experts still estimate that residential real estate prices in Ireland will rise by around 6% in 2016. These figures are nationally based and will likely not reflect the position in Dublin, for reasons we have already outlined.

One of the major concerns is that if restrictions help to price people out of the residential real estate market there may not be sufficient rental properties to accommodate them, and those that are available will be priced at a high rental cost. As real estate prices recover, so landlords are being encouraged by banks to sell their properties and make the most of the situation. There is no incentive for new landlords to take their place.

Many experts feel that incentives would be helpful in helping to build on seriously depleted rental availability. Rental properties have become a crucial part of the housing market in Ireland and it will be interesting to see what developments 2016 brings in the area; just as it will be interesting to see if the expected rise in residential real estate prices comes to fruition.


About the Author: Nitin Yadav from Frugaa is a real estate geek. In his free time, he enjoys to write survey/research based article on the current real estate market growth & Trends.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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