Ireland - rents rising fast, house price inflation slowing
Last Updated: January 04, 2016
Based on the latest Daft.ie report, average transaction prices were up by 5.6% during the year to September 2015.
In Dublin, Ireland's capital city, house prices slowed even more. Dublin's residential property price index rose by 3.35% (3.55% inflation-adjusted) during the year to November 2015, way below last year's 22.40% (22.28% inflation-adjusted) y-o-y increase.
House prices were pushed in 2013-4 by Ireland's strong economic growth. The housing market then slowed, especially in Dublin, largely because of central bank measures in January 2015 which limited loan-to-value ratios on houses priced over €220,000 and on 2nd purchases to 80%, and 70% on buy-to-let purchases. Loans for private dwelling homes were also limited to 3.5 times gross income.
- In Dublin City Centre, the average asking price rose by 5.4% to €247,803 (US$ 271,270), during the year to Q3 2015.
- North County Dublin's average asking price rose by 4% y-o-y to €260,512 (US$ 285,183).
- West County Dublin's average asking price rose by 3.3% y-o-y to €264,957 (US$ 290,049).
- South County Dublin's average asking price rose by 1.6% y-o-y to €520,451 (US$ 569,738).
Outside Dublin, average residential prices rose by 9.60% (9.82% inflation-adjusted) during the year to November 2015, according to the CSO Ireland. Based on Daft.ie's figures:
- In Carlow (located in Leinster, eastern Ireland), the average residential asking price was €143,967 (US$ 157,601), a 6.9% y-o-y increase to Q3 2015.
- In Cork County (located in Munster, in Ireland’s south), the average asking price was €174,951 (US$ 191,519), up by 15.9% y-o-y to Q3 2015.
- In Galway County (located in Connacht, Ireland’s western region), the average asking price was €152,209 (US$ 166,623), a 13.2% rise during the year to Q3 2015.
- In Waterford County, the average asking price was €179,590 (US$ 196,597), up by 15.8% y-o-y to Q3 2015.
- In Limerick County, the average asking price was €149,613 (US$ 163,781), a 10% y-o-y increase to Q3 2015.
- In Monaghan (located in Ulster, in the Republic of Ireland's north), the average asking price was €135,493 (US$ 148,324), a 10.9% y-o-y increase to Q3 2015.
Apartments rose by 7.36% during the year to November 2015 (7.57% inflation-adjusted); houses rose by 6.52% y-o-y (6.73% inflation-adjusted).
Excellent yields in Dublin. Rents and yields keep pace as Dublin house prices soar.
The last two years have seen a dramatic reversal in Dublin, with house price soaring. Prices of 2 bedroom terraced houses in Dublin city centre have surged 32.5% over the last year, according to the Daft.ie report. In few parts of Dublin have prices moved up less than 26%, and in some areas the rise was 35%.
This is in stark contract to the rest of Ireland.
Most parts of Leinster, Munster, Connaught and Ulster have barely moved, though Cork and Galway are showing good house price rises.
The good news is that if you have property in Dublin it should let quickly. There is even something of a mood of panic among students about property availability. Rents have moved up almost in line with prices, so that gross rental yields have remained very good in Dublin.
In Dublin city centre, yields are around 8%. In the so-called Dublin commuter counties, yields are can be over 7.5% for 2 and 3 bedroom properties.
Galway City and Limerick City have also seen rents move up significantly, so that they too now have high yields of over 8% for some property sizes.
We could not come up with rental yields figures for Ireland because the great majority of the property listings on the major real estate websites in Ireland, like Daft and MyHome, lack square metre sizes.
But Daft produces excellent data, so it seems appropriate simply to reproduce their rental yields calculations.
Round trip transaction costs are moderate for buyers of residential property in Ireland. See our Ireland residential property transaction costs analysis and our Residential property transaction costs in Ireland compared to other countries.
Taxes on rental income and capital gains are moderate
Rental Income: Gross rental income is taxed at 20%, withheld by the tenant. The taxpayer may file a return and claim relief for expenses related to his property.
Capital Gains: Capital gains is imposed at a flat rate of 33%. Taxable capital gains are generally computed as selling price less acquisition costs, adjusted for inflation, and improvement costs.
Inheritance: Inheritance is taxed at a flat rate of 33%, with certain non-taxable amounts deductible before the tax is levied.
Residents: Residents are taxed on their worldwide income. Numerous tax credits and deductions are available to residents; of which the actual values depend on the taxpayer’s personal circumstances.
Buying costs are moderate in Ireland
Round-trip transaction costs are around 4.94% to 13.205% of the property price. The buyer pays the stamp duty (1% to 2%), legal fee (1% to 1.5%, plus 25% VAT), and registration fee.
Strong but fair tenant protection in Ireland
Ireland has strong tenant protection laws.
Rents. The parties are free to negotiate rents, but the amount must not exceed the open market rate. The rent may be reviewed and can only be adjusted once a year. Rent disputes go to the Private Residential Tenancy Board (PRTB).
Tenure Security. Security of tenure is effective for four years; during the first six months, the landlord can terminate the leasing contract without specifying grounds but once a tenancy has lasted six months, the landlord can only terminate the tenancy for the next 3 1/2 years citing just causes.
Ireland's economy now strongIn Q3 2015, the country's economy posted 7% annual growth, with GDP rising by 1.4% during the quarter. During the whole year 2015, the Irish economy is believed to have expanded by 5.8%. Growth is expected to be somewhat slower at 4.7% in 2016, according to the central bank.
For three consecutive months the country has suffered from deflation, with consumer prices declining by 0.3% during the year to November 2015, according to Central Statistics Office (CSO) Ireland.
Unemployment stood at 8.9% in November 2015, down from 10.4% in November 2014, and lower than the 13.6% average from 2009 to 2013. Ireland's average unemployment rate of 4.4% between 2000 and 2007.
Ireland's economy has been on an unusual journey over the past 5 years.
Ireland had the euro zone’s highest budget deficit in 2010, at 31.2% of GDP. In November 2010 it had no choice but to seek a €67.5 billion ($82 billion) bailout from the European Union (EU) and the International Monetary Fund (IMF). In exchange, Ireland committed to a harsh austerity program.
The country spent around €80 billion to establish the National Asset Management Agency (NAMA) to buy toxic loans, primarily to improve the availability of credit to the Irish economy, and to remove non-performing loans from bank balance sheets.
In June 2012, 60.29% of Irish voters agreed to the European fiscal compact of May 31, 2012, allowing Ireland to access to the European Stability Mechanism, a €500 billion ($618 billion) bailout fund.
By 2011 the Irish budget deficit had fallen to 12.5%, and to 8% in 2012, comfortably within the 8.6% target set by Ireland’s international creditors: the EU, ECB and IMF. The budget deficit declined again to 5.7% of GDP in 2013. At end-2013 Ireland became the first country to exit the eurozone bailout programme.
In 2014, the budget deficit shrunk to 3.9% of GDP. In December 2015, the finance ministry slashed their budget deficit forecast for 2015 to 1.7% from an earlier prediction of 2.1%. The reduction was due to the country's economic growth and the surge of corporation tax payments, according to Finance Minister Michael Noonan. "For 2016 we were pitching for 1.2, but ... it would be a safe assumption to take 0.4 off that as well. That would be 0.8, 0.7 percent," said Noonan.
The Irish general election must be held by April 8, 2016. The 158 members of Dáil Éireann (Irish parliament) then elected will then choose a Taoiseach (prime minister).
Ireland's current Taoiseach is Enda Kenny, who took office in March 2011. Kenny belongs to the Fine Gael party, which dominated the 2011 elections in terms of seats won, and has since ruled in coalition with the Labour Party (which is its usual political partner). The differences between the two major Irish political parties (Fine Gael and Fianna Fail) do not follow a leftist-rightist cleavage, but reflect long-standing differences within the nationalist tradition.