When you bear in mind that Ireland is just starting to recover from a £56 billion rescue package from international lenders it may surprise many to learn that Dublin property prices have rocketed. Indeed the country is still coming to terms with a very different financial landscape in light of the collapse of the property market and the financial sector. When you also throw in an array of political scandals you do begin to wonder why there is so much demand for property in Dublin and where this confidence is coming from.
There is a growing belief that perhaps the property house boom in Dublin, which is not occurring outside of the capital, may be down to limited stock for sale and repossession properties being held back from the marketplace.
Dublin property prices in 2013
A report by leading estate agent Knight Frank has confirmed that Dublin property prices increased by 17.5% during 2013 which puts the area ahead of other markets such as Los Angeles, Tokyo and Dubai. When you bear in mind that Dubai has been at the centre of concerns regarding property price bubbles perhaps it is no surprise to learn that similar concerns are now being expressed about Dublin?
Quote from PropertyForum.com : “The property market in the UK has an array of different angles, different niches and one which has caught the mind of many real estate investors is the sale and lease back of supermarket properties.”
While a 17.5% increase in property values within 12 months is extreme to say the least, there is evidence to suggest that some areas of the capital (such as postcode D14) may have experienced increases of up to 22% last year. This comes at a time when tens of thousands of mortgage holders are in arrears, thousands of repossession properties appear to be “off market” and confidence outside of Dublin appears to be fragile at best.
Is there support in the medium to long term?
While there is no doubt that the Irish economy is performing better than many had expected in light of the European Union bailout, mortgage arrears will be a problem for many years to come. The latest data suggests there is €2.1 billion of outstanding mortgage payments from 2013 and indeed €1.8 billion of this relates to mortgage holders in arrears for more than 12 months. When you bear in mind the problems within the mortgage industry, the fact the financial sector is still relatively subdued and there are literally thousands of properties waiting for “any price sales”, why is there such support?
It will be interesting to see how the Irish government reacts to this real problem because while Dublin seems to be encased within something of an economic bubble, the rest of the country is struggling to make ends meet. In many ways you can compare this situation to that in England with London performing significantly better than other domestic markets although the economic outlook and mortgage arrears situation is very different.
Conclusion
There is no way that the Dublin property market can continue to grow at the pace experienced in 2013 and this creates something of a difficult situation for the Irish authorities. Property markets outside of Dublin are struggling, many households are still in arrears with their mortgage and increasing interest rates to subdue the Dublin property market could decimate those outside of the capital. This is a very difficult balancing act for the Irish authorities although the UK government has been challenged with such situations many times over the years with the “disconnected” performance of the London property market.