Why are Houses in Ireland Getting More Expensive?
Based on recent news, Ireland’s housing market continues to see a trend in rising prices for homes. A report from Ronan Lyons of daft.ie states that even in the cheapest part of the country – Leitrim – a house goes for €124,000 on average. In stark contrast, the most expensive area – South Dublin County – averages at about €587,000 per home. Also, Lyons observes that the average house prices saw an increase of about €87,000 from their lowest point. Economist Jim Power of financial services group Friends First additionally notes that Irish house prices may balloon a further 10% later this year.
As a house buyer, this may lead you to question what’s behind all this. Why are homes all across Ireland getting more and more costly?
Three major factors are driving prices to the roof, namely supply and demand, rising population, and better spending power. Let’s look at each one in detail and how they affect the price of housing.
Supply and Demand
Like any market, the housing market is driven largely by the economic laws of supply and demand. In the case of Ireland, demand for homes are rising despite no increase in the supply. As supply becomes more scarce, prices naturally increase.
The logical way to offset the rising prices is to build more houses and apartments. However, new construction seems to be slow in meeting the growing demand for housing. Hence, prices are going higher.
Rising Population
The higher demand for homes is caused by population growth. Lyons’ report shows that Ireland’s population is increasing by 50,000 people per year. This may not seem much, but in a country of only about 4 million people, it’s a significant number.
Additionally, as is common in urbanised nations, household size is getting smaller. In the past, rural households in Ireland had, on average, four people. Now, that number has decreased to two people per household, for most city-dwelling folk.
With these, the housing market has to compensate. Following the law of supply and demand, it’s either more houses and apartments are built, or the prices go up. As the creation of new homes does not keep up with demand, prices would only skyrocket.
Better Spending Power
In other words, more people have a greater capacity to purchase homes. In Ireland, two things contribute to this: more employment opportunities and more readily available lines of credit. As more people get jobs and earn more, there would be more money available for them to buy homes. To make purchasing less of a financial burden, home buyers would often resort to obtaining credit from banks and other financial institutions. If credit is easily available, more people could afford to buy houses.
This again contributes to a greater demand for homes. Once again, following the law of supply and demand, prices will rise if no new supply of homes are created.
Although house prices are continually increasing, having your own property is still a great asset. Real estate usually gains value over time, and if you position yourself correctly, you may stand to profit from the gains in price yourself. We at Redfords Properties are here to help you find the best deals for your needs.
