Irish property market going full steam ahead

If we look back only a few years ago the Irish and Spanish property markets needed multibillion euro bailouts and were effectively friendless. No investors were buying, sellers were aplenty and the banks were brimming full with repossessed properties. Fast forward and today we see the Irish residential property market going full steam ahead rising by 9.4% year-on-year to September 2015. So, what is pushing the Irish property market and can this rate of growth continue in the short term?

Renewed confidence

An €85 billion bailout seems to have been enough to steady the Irish ship and encourage short to medium term economic growth. Indeed the economy grew by 7.2% in the second quarter of 2015 with expectations of full-year growth of 5% falling to around 4% in 2016. The rise of 7.2% in the second quarter is a record for the Eurozone but there is growing concern about the wild boom and bust scenario emerging across the country.

The strengthening confidence in the Irish residential property market and the fact that the government is subsidising first-time buyers has led to a significant increase in demand. The OECD believes that the Irish government should look to dilute the subsidising of first-time buyers and push homeowners towards the rental market. The idea being that reducing the amount of debt taken on by first-time buyers, and those moving up and down the property ladder, would give a firmer base going forward.

Is it all happening again?

There is a feeling of déjà vu in relation to some of the circumstances emerging today because just before the financial crash of 2008 the Irish market was booming. It is easy to forget that the current economic scenario is based upon a €85 billion loan that effectively stopped the country from going bankrupt.

The ECB recently carried out a review of the European real estate market pointing out factors feeding appetite for property such as rising income growth, a historically low interest rate environment and higher employment. Indeed, when you also consider the fact that mortgage lending rates have fallen by 0.9% since 2013 perhaps this explains why certain areas of the European real estate market are booming?

Cooling the market

The Irish government, along with their Spanish counterparts, are under growing pressure to try and cool their overly buoyant real estate markets. There are obviously a number of ways in which this can be achieved but would the Irish government rather curry favour with voters by supporting rising property prices or look longer term?

As we have seen in the UK, the political arena is changing with extreme lurches to the left and right across Europe. Would the Irish government risk reducing its growing popularity by pouring cold water on the Irish residential property market? It is difficult to know how politicians will react and let’s not forget that we don’t know what is just around the corner. Investor confidence is fickle and there are economic challenges in many parts of the world so perhaps Irish homeowners and investors should be allowed to enjoy the moment?

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>