Property price increases in Ireland: Market trends and understanding the Residential Property Price Index

Ireland's property market has seen its fair share of ups and downs over the past twenty years. From rapid price increases to significant downturns and a recent surge, here's a look at the key moments that shaped the market.

Published: 2 September 2024

Estimated read time: 6 minutes
Contents:

Residential Property Price Index

The Residential Property Price Index (RPPI) is an important economic indicator that tracks changes in the prices of residential properties across Ireland. The data is collected by the Central Statistics Office (CSO) and provides insights into the trends in the housing market, showing whether property prices are rising or falling over time.

This makes the RPPI a valuable tool for homebuyers, sellers, policymakers, and economists to understand and analyse the real estate market.

How to understand the RPPI

A property price index graph shows how the prices of properties have changed over time. Here are the three key points to look at and how to understand them in simple terms:

  1. Time: Look at the bottom of the graph. This is the timeline, showing the months or years.
  2. Index numbers: On the left hand side of the graph, you'll see numbers. These numbers represent the price index. An index of 100 is usually the starting point or base value.
  3. Line: There will be a line that goes up and down across the graph. This shows how property prices have moved over time. If the line goes up, it means property prices are increasing. Whereas if the line goes down, it means property prices are decreasing.

The latest RPPI graph shows that now is a great time to sell in Ireland, as property prices are at their highest. Predictions suggest that this will continue to increase, however this is uncertain and depends on different factors.

How economic and social events impact property prices

Both economic and social events can have a significant impact on property prices, by either increasing or decreasing them. Here's a brief explanation:

Economic conditions

The overall health of an economy influences people's ability to buy homes. In a strong economy, with high employment and rising incomes, more people can afford to purchase properties, leading to increased demand and higher prices. Opposite to this, in a weak economy, with rising unemployment and lower incomes, demand for homes may decrease, causing prices to drop.

Interest rates

The cost of borrowing money to buy a home, influenced by interest rates, affects property affordability. Lower interest rates make mortgages cheaper, encouraging more people to buy homes and driving up prices. Higher interest rates have the opposite effect, making borrowing more expensive and potentially reducing demand.

Social changes

Shifts in how people live and work can affect the demand for certain types of properties. For example, changes in population size, urbanisation, or preferences for remote work can lead to higher demand in specific areas or for specific types of housing, influencing prices accordingly.

Government policies

Policies related to housing, such as tax incentives, subsidies, or regulations on property transactions, can influence the housing market. For instance, policies that make it easier for first-time buyers to purchase homes can increase demand, while regulations limiting foreign ownership might reduce it.

Overall, property prices are influenced by a combination of these factors, which can vary significantly depending on the specific circumstances at any given time.

Over the years: Ireland's property market

Since 2005, the Irish property market has experienced a boom, a significant crash during the global financial crisis, followed by a steady recovery and recent price surges.

The boom of the early 2000s

In the early 2000s, Ireland experienced a property boom. The economy was strong, and people were eager to buy homes, leading to skyrocketing prices. By 2007, just before the economic crash, the average house price in Ireland was nearly €310,000, with Dublin seeing the most significant increases.

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2008 Financial crises: When markets are hit by a crisis, property prices are impacted and drop overnight.

The crash and recovery

The global financial crisis hit Ireland hard in 2008, causing property prices to drop sharply. Many people found their homes were worth much less than what they paid.

By 2013, the average house price had fallen by about 50% from its peak. However, as the economy slowly recovered, so did the housing market. By the late 2010s, prices were climbing again, although they were still not as high as before the crash.

Recent trends

In the last few years, property prices in Ireland have risen once more, reaching new highs. This increase is partly due to a shortage of homes, especially in cities like Dublin, where demand remains strong.

The COVID-19 pandemic briefly slowed the market, but prices quickly bounced back. Now, the average price of a house in Ireland is around €350,000, higher than the peak before the crash.

What's influencing prices now?

Several factors are driving the current property prices:

  • Shortage of homes: There aren't enough new houses being built, especially in big cities, making existing homes more expensive.
  • Strong economy: With more jobs and higher wages, people can afford to pay more for homes.
  • Low interest rates: Cheaper loans have made buying houses more attractive.
  • Government programs: Schemes like the Help-to-Buy program help first-time buyers, affecting demand and prices.

Many are keeping an eye on the property market to see if prices will continue to rise or start to level off. Factors like potential changes in interest rates and the overall health of the economy will play crucial roles in shaping the market's future.

A rich selling opportunity

As of 2024, it could be a good time to sell property in Ireland, given the high demand and rising prices as described above. With any property sale, it's advised to choose a good estate agent who knows your area and property type well to help you secure the property sale you're after.

As a general rule of thumb, it's always beneficial to consider several estate agents before choosing one. That way, you can ensure that you've chosen an agent you're comfortable with, and have the same goals in mind.

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Frequently asked questions

What is the Residential Property Price Index (RPPI) in Ireland?

The Residential Property Price Index (RPPI) is an economic indicator that tracks changes in residential property prices across Ireland. Compiled by the Central Statistics Office (CSO), it provides insights into housing market trends, indicating whether property prices are rising or falling over time.

How can I interpret the RPPI graph?

To understand the RPPI graph:

  • Time Axis: The horizontal axis represents the timeline, showing months or years.
  • Index Numbers: The vertical axis displays index numbers, with 100 as the base value.
  • Trend Line: An upward line indicates increasing property prices, while a downward line signifies decreasing prices.

What factors influence changes in the RPPI?

Several factors impact the RPPI, including:

  • Economic Conditions: Strong economies with high employment and rising incomes can lead to increased property demand and higher prices.
  • Interest Rates: Lower interest rates make mortgages more affordable, boosting demand and prices; higher rates can have the opposite effect.
  • Social Changes: Population growth, urbanisation, and remote work trends can shift housing demand in specific areas.
  • Government Policies: Tax incentives, subsidies, and housing regulations can directly affect property demand and pricing.

How has Ireland's property market evolved over the past two decades?

Since the early 2000s, Ireland's property market has experienced significant fluctuations:

  • Early 2000s Boom: A robust economy led to soaring property prices, with the average house price nearing €310,000 by 2007.
  • 2008 Financial Crisis: The global downturn caused property values to plummet by approximately 50% from their peak by 2013.
  • Recent Trends: The market has since rebounded, with property prices reaching new highs in recent years.

Why is the RPPI important for homebuyers and sellers in Ireland?

The RPPI offers valuable insights into market trends, assisting homebuyers and sellers in making informed decisions. By analysing the index, individuals can gauge optimal times for purchasing or selling properties and understand the broader economic factors influencing property values.

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