For those saving to put a deposit down on their first home, the goalposts keep moving, with property prices in the State rising year on year.
If you finally reach your savings goal, it’s hard to know if its worth taking the plunge or holding off in case the market slows down.
With that in mind, The Irish Times has asked property experts where the market stands and whether house prices are close to reaching their peak.
Demand continues to outstrip supply, says John McCartney, lecturer in property economics at TU Dublin and adjunct associate professor at University College Dublin (UCD), pointing to house price inflation nationally, which is likely to reach more than 7 per cent in 2025 for the ninth time in 12 years.
RM Block
However, the dearth of supply is not the fault of under-building, McCartney says.
Access to homes grew in line with the number of households that were formed between 2011 and 2022 and, with population growth slowing and completions of new homes picking up since then, this remains the case.
“The excess demand comes from the weight of money chasing property,” he says.
Although real earnings have fallen since 2020, McCartney explains that this has been offset by the following factors: the fact that nearly half a million more people are working; that easing of mortgage rules mean homebuyers can borrow more; the implementation of Government subsidy schemes and the bigger role that has been taken by the State in buying, leasing and renting properties.
[ At a glance: How have Dublin property prices changed from post-crash to now?Opens in new window ]
He adds that although the mainstream debate on housing fixates on the number of homes being built, that number and property prices themselves will continue to rise as long as the labour market stays strong and public finances can sustain the Government’s strategy “of boosting demand to support prices”. And “nothing suggests that the wheels are about to fall off this wagon”.
Certain potential risks to the economy have been present for some time without having a significant impact on housing, McCartney says, pointing to the volatile US administration, military conflicts in Ukraine and Gaza, overruns in Government spending and the narrow tax base.
As well as that, the next election remains years away and, “perhaps surprisingly given the squeeze on living standards, there has only been muted pushback against the recent budget, which sacrificed energy credits and tax-band indexation in favour of development incentives”.
While “vulnerabilities” build up gradually, the events that could trigger a potential economic crisis are “unpredictable”, McCartney says.
“If and when such an event occurs, Ireland could be fighting two fires: the economic crisis itself and a housing crash arising from the State’s inability to maintain its escalating demand supports.”
Orla Hegarty, assistant professor at the school of architecture, planning and environmental policy at UCD, agrees that “we will most likely continue to see prices rise and the [housing] crisis deepen, barring some external shock”.
The only way to achieve affordability at scale for buyers, renters and the exchequer, she says, would be to “produce homes at cost rather than at market prices”.
Hegarty adds that the Government has been incentivising supply at a high cost in a “mistaken belief” that more supply and wage inflation will achieve affordability.
Mortgage adviser Michael Dowling also concurs that prices will continue to rise next year, at a rate of 3 per cent, he estimates.
However, the good news for prospective buyers, says Dowling, is that interest rates are set to remain stable, and that a fixed rate of 3 per cent for three years will be available for those buying new homes with Ber ratings of B3 and above.
Completions in the mortgage market will increase by 8 per cent, he predicts – from €14.4 billion to €15.6 billion.
Sherry FitzGerald chief executive Marian Finnegan and DNG chief executive Keith Lowe also predict prices will continue to rise next year – with Finnegan predicting they will rise at a rate of 6 to 8 per cent and Lowe predicting a rate of 3 to 4 per cent.
Due to the number of new house completions failing to keep pace with demand, “transaction activity is effectively capped, with year-to-date sales broadly in line with the same period last year”, Finnegan says.
“Ireland’s housing market remains defined by constrained supply, strong underlying demand and a gradual policy-led shift toward increased output – conditions that will continue to shape price trends in the years ahead,” says Lowe.
He highlights legislative changes due in March for buy-to-let properties accelerating the trend of small landlords exiting the market and the reintroduction of bridging finance as factors likely to boost the supply of second-hand homes.
Adding that Government actions and incentives, ranging from improved planning pathways to support for apartment delivery and affordable purchase schemes, will gradually help increase new homes output.
“As these factors combine, we anticipate that house-price inflation will begin to ease to more sustainable increases over the coming years as the market slowly moves toward a more balanced equilibrium between supply and demand,” he says.
