Analysing Irish House Prices Relative to Affordability

Hello, long time lurker here and have benefited from all the knowledge shared on the site, so I wanted to give some personal thoughts on the portrayal of Irish house prices and their apparent evolution through boom/bust/dead cat bounce/bubble.

I’m a prospective house buyer and over the last year or so, I’ve become frustrated with the spin many in the media, government and citizens in general put on house prices. You’ll hear things like “houses have never been so affordable” or “we’re 49% from peak prices so what does it matter if Dublin prices go up 15% a year. Sure they’re still cheap”

Well for me, those statements would only be true if mortgage rates were precisely the same as in the boom years but the fact is that they’re not. However no one seems to take the actual monthly repayments into account and what relatively speaking the same monthly repayment would have gotten you in previous years. All we hear are absolute comparisons e.g. A semi-d in South Dublin being mooted as great value at €400k in 2014 becasuse it was €750k in 2006. But actually, the repayments are probably pretty much the same too in absolute terms so to some degree, the house is actually as expensive as it was in 2006.

So I feel we’re right back in the mindset and madness of the boomtimes.

I’m no analyst and I would love to see some proper statistics done on this but it really does seem to me that we’re not looking at the right things when it comes to house price comparisons and the nation are being deluded.

Perhaps instead of focussing purely on absolute price or cost per square metre (which do still have their merits), we should focus more on affordability and compare the cost of a mortgage then and now for each house.

What do others think? Anyone with good analysis or grasp of the various figures available?

Thanks for reading!

Late Approval bump.

Do you want to analyse Irish house prices, Irish property prices, Dublin house prices, Dublin property prices, south Dublin house prices or south Dublin property prices?

Analysis - price/sq.ft.

Daft 2013 PPR analysis … -analysis/

The House Price Report Q4 2013 … 4-2013.pdf

10th Annual Demographia International Housing Affordability Survey: 2014

ECB Interest Rate History … ex.en.html

Regarding repayment comparisons, at the peak of the boom the ECB rate was about 3%. An ECB+1% tracker was therefore about 4%. Standard variable rates now are about 4-5% depending on LTV. Not a massive difference.

The confounding factor when discussing international comparisons is that people on median incomes in the Dublin metropolitan area don’t want to live in median priced properties in the Dublin metropolitan area, they want to live in nice houses in nice areas. The quality of the existing housing stock is irrelevant to to supply/demand balance unless there is high-quality affordable new building in well serviced areas to offer substitutability.

When dealing with affordability reports, they usually take into account 2 buyers(a couple) rather than a single buyer where its far harder to afford a a property.

Though the poster was coming from a different angle - I think a lot of the tracker then v SRV now stuff is covered in this post.


I think Esselte made two excellent points in the madness is returning thread;

‘ECB rate in 2006 was 4.50% so somebody on a ECB + 0.75% tracker was paying 5.25%. You can now get a variable rate of 4.50% from Bank of Ireland so credit was not cheaper in 2006.
If you can now buy a house for 50% of what it cost in 2006, at 4.50% instead of 5.25%, monthly repayments would not be higher, they would be approx 57% lower than they would have been (and no stamp).’

‘A persons view on whether property was overvalued or not in 2006 would have been based on prices in 2006 and mortgage rates in 2006 i.e. when they were paying 5.25% interest
You cannot argue that prices are overvalued today because they were overvalued in 2006 and someone that bought, using a tracker mortgage, in 2006 could be paying a lower mortgage than someone buying the same property today with a SVR mortgage.
If ECB rates shot up tomorrow to 20% then someone buying today would be paying far far less on their mortgage than someone that bought the same property in 2006 on a tracker. Would that suddenly make property under valued?
Compare mortgage repayments in 2006 on a property bought in 2006 with mortgage repayments today on a property bought today. Anything else is nonsense.’

Basically in the context of your post - you are forgetting what the ECB rate at the time was and using what it is now to compare affordability decisions 7 years apart.

Also I think pinster affordability and the general public affordability is two different things. From what I gather most here are a risk adverse bunch and sensibly want repayments to be 20-25% of disposable income. However from my interaction with friends, family, colleagues most are happy to take on a higher percentage especially with larger salaries (remember even though it’s a higher % at these salaries there is more €’s left over).

This thread is a great example


Some pinsters recommendations based on €130k income (rising to €180k guaranteed in 10 years), 60k deposit and guaranteed jobs & pensions:

  • €250k - €300k
  • €330 - €350k

Now who thinks they are ‘real world’ figures? I’m risk adverse myself, but they look low low figures even to me.

Very very True.

Good point Kenny and Eschatologist.

The main driver of affordability is peoples disposable income which has taken a serious hit since 2006, even assuming wage rises with inflation. You have 2% more paid out in VAT, 10+% more in motor tax, increases in health insurance premiums of 20+%, USC, tax band widening, PRSI increase, stamp duty now applying to first time buyers. I’m sure I’m missing some.

I’m lucky to have wage rises in the last couple of years. I know others who have had smaller percentage rises and they are still taking less home than in 2008 for example.

The one group to whom it is cheaper are risk-averse cash buyers (the kind who would keep much of the money on deposit), since not only has the price fallen, but so has the return on savings, through a combination of falling interest rates and rising DIRT (so the opportunity cost is lower). The problem for these is lack of stock, since there are lots of potential vendors who either can’t afford to move or else don’t really need to and now aren’t willing to make a discretionary lifestyle house move in uncertain times.

Nice is subjective and misleading. If you think that SCD is the arbiter of nice, I’d hesitate to agree.

Being median income does not being below “nice”. In fact, it’s far to say, SCD is less nice and more leet to be frank. Most parts of the city are nice. You’re not suggesting that median income people should be happy to survive on buying in not-nice areas, like, oh, let me see, Darndale.

There’s a world of difference between Darndale and most of SCD. The simple truth - as I see it - is that we can’t have a talk about the Irish property market and what most people want online because so many discussions seem to wind up circling around SCD. Most people I know don’t actually want to live in SCD and a lot of people I know only live in Dublin at all because that’s where quite a lot of the work is.

I’m positioning myself to get the hell out of this city. It’s warped when you assume that someone on a median income shouldn’t aspire to living in a “nice area”. Most people want to and do live in nice areas. Most of the city qualifies as reasonably nice. If the median income cannot aspire to nice, either your definition of nice is far, *far *too limited, or the city is already in serious social trouble.

As riots have been reasonably limited in the last few years, apart from that ridiculous sit down protest on O’Connell Street a few months ago, I suspect your definition of nice is far, far too limited.

I don’t - incidentally - think it’s unfair for someone on a median income to aspire to more than a one bedroomed apartment. However, much of the recent history has particularly limited horizons for the median incomes.

You’re ascribing views to me which I haven’t presented.

Jump off the hobby horse!

If ‘nice’ is subjective and misleading why do you continue to use the word throughout the post?

Fwiw, that 4.50% ECB rate struck me as high, so I looked it up: ( … story.html)

2005 6 Dec. 2.25 2006 8 Mar. 2.50 2006 15 Jun. 2.75 2006 9 Aug. 3.00 2006 11 Oct. 3.25 2006 13 Dec. 3.50So the average ECB rate for 2006 was below 3.00, and somebody on an ECB + 0.75% tracker was paying below 3.75%. So credit was cheaper in 2006.

  1. are median priced properties nice or not?

  2. if median priced properties are not nice, why not?

  3. if they are nice, then what is your problem with people on median incomes wanting to live in nice properties?

All I can take away from the quote above is that you appear to think that people on median incomes should only be able to afford some sort of sub nice properties. I’m suggesting that median should be well into the nice bracket.

Because as far as I’m concerned, it’s not beyond the aspiration of someone on a median income and I don’t limit to some one on above median income. My view of nice is that it’s a lot broader than a “too expensive for people on a median income” bracket.

But I was responding to a piece which was written in such a way as to imply someone on a median income shouldn’t be able to afford nice.

What’s your definition of nice then?

There is no universal definition of nice, but Irish housing stock is, by some international standards, pretty crappy. It’s therefore understandable that people who have prudently sat out the boom and crash want to access the nicer end of the property spectrum.

But property prices aren’t determined by quality, they’re determined by credit availability, supply and demand, so that expectation may be realistic, or not.

City housing markets always favour incumbents because prices are set at the margin, and as the city grows and commuting times stretch, the properties nearer the jobs and the fun become relatively more desirable than the new stock further out. That rule continues whilst the urban economy prospers, and may break down occasionally (see Detroit, or Waterford, for example).

I have no opinion on the right value for Dublin house prices. They reflect what the buyers can afford to pay at any point in time. The current lack of repos is a bit galling, but were there lots of repos it would only represent a once-in-a-lifetime disruption - the nouveau south Dubliners (or whatever you’re having yourself) would become the next generation of incumbents and the cycle would continue.

If I’m pissed off about anything it’s bad planning and ugly houses. We can’t all live within walking distance of Grafton Street or wherever, but we can at least hope to live in communities that are well designed, fit for purpose and full of homes that don’t make us feel like a nation of aesthetically-blind car-dependent peasants.

FWIW I live outside the M50. It’s grand. Mortgage is cheap, schools are great, kids are happy, sometimes the sun shines, sometimes it doesn’t.

11th Annual
Demographia International
Housing Affordability
Survey: 2015 … 41063.html

Figure 2 pg 10 is very telling in a bad way for other countries including OZ and NZ

For the second year in a row, the United States had the most affordable housing
among major metropolitan markets, with a moderately affordable Median Multiple of 3.6.
Canada (4.3) Ireland (4.3), Japan (4.4), the United Kingdom (4.7), and Singapore (5.0) had seriously unaffordable housing. Three national markets were severely unaffordable, with Median Multiples of
5.1 or above. These included China (Hong Kong), with a Median Multiple of 17.0, New Zealand, at 8.2 and Australia at 6.4. Annual major metropolitan area Median Multiples are shown in Figure 2.

Do not be fooled by Demographia – it sounds like a legitimate organization but it is just a shill job put together by developers to discourage planners from stopping urban sprawl. It is not a legitimate provider of information - just a vested interest mouthpiece for suburban builders. Read below, for example: