Low level of Irish property transactions contributing to inflated prices, report indicates

on Feb 25, 2015

A new report by Geodata, the research arm of Irelands postal service An Post, has revealed that a mere two percent of the two million houses that make up Irish housing stock changed hands in 2014. This is half the amount of transactions that would be considered normal in a typical year of trading. The low level of housing traded last year may be due to strict mortgage regulations introduced by Ireland’s central bank recently. It supports growing evidence of a shortage of housing stock on the Irish market which is currently contributing to inflated house prices, particularly in Dublin.

Commenting on the report, economist Annette Hughes director of DKM Economic Consultants said:
“By using the data from the Property Price Register, the Census of Population and the GeoDirectory Database (of addresses) we have a unique insight into the residential building stock in Ireland. One key statistic which the report highlighted was that the national average housing turnover rate in 2014 was 2pc, well below what would be deemed to be a more normal housing turnover rate of around 4pc.”

In contrast, six percent of the UK housing stock was traded in 2014, in spite of more strict lending rules being introduced there too. Yet, while house prices in the UK continue to experience robust levels of growth as is also the case in Ireland, the unusually small trading stock in the Irish market may indicate a level of over valuation. It is not unthinkable that something similar may be occurring in the UK at present, given that it too is experiencing a major shortage of housing.

Obviously the Irish residential property market is much smaller than that of the UK, it is also in the Eurozone which attributes a certain degree of Eurocentric behavior towards Irish real estate, particularly in the area of regulation of the market. There is, however, a large degree of interest in Irish property from British retail property investors and there are also great similarities in the way that business in the two countries is conducted.
In this context, observing the behavior of Ireland’s residential property market with regard to stock shortages may, in some respects, serve as a comparable model for the UK.

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