Factors to Consider When Buying a House in Ireland

Overview of House Prices

• The video discusses critical factors for deciding whether to buy a house in Ireland now or wait until next year, starting with the significant increase in house prices.

• Research from the Banking and Payments Federation Ireland (BPFI) indicates an 8.7% rise in house prices from January to December 2024, compared to a 4.1% increase in 2023.

Price Trends by Property Type

• Secondhand homes saw a notable price growth of 10.5% in 2024, while new builds experienced a more modest increase of 5.2%.

• Despite rising prices, there were still 48,775 residential property purchases within the same timeframe.

Median House Prices and Regional Variations

• The median price for houses purchased up to February 2025 was €360,000; however, this varied significantly by location.

• Dunlier Ratown had a median price of €670,000 while Literum's was only €185,000; border counties like Cavan and Donegal saw the highest growth at 13.4%.

Affordability Challenges for Buyers

• A first-time buyer couple would need approximately €36,000 as a deposit and an income of €81,000 to afford the median-priced home.

• In Dublin's surrounding areas like Dunlier Ratown and Bray/Greystones, deposits required are substantially higher due to elevated median prices.

Historical Context and Current Valuation

• The national property price index is currently reported at 17.3% above its peak from April 2007; however, when adjusted for inflation, it is actually about 13% below that peak value.

• Since early 2013, Irish house prices have increased by approximately 61.6%, influenced heavily by low interest rates set by the European Central Bank.

Concerns Over Market Sustainability

• The ESRI raised concerns regarding current price levels' sustainability amidst recent growth rates since early 2024.

• There is speculation about potential corrections similar to those seen between 2008 and 2012 due to overvaluation—estimated at around 8% to10%.

Implications for First-Time Buyers

• While current market conditions suggest some overvaluation exists, they differ significantly from past crises driven by unsustainable lending practices.

• Housing affordability remains critically low; only about 41% of first-time buyers have saved enough for a deposit amid high living costs.

Saving Strategies Amidst High Costs

• Many prospective buyers face challenges saving for deposits due to high rents and living expenses; research shows that 25% have not started saving yet.

Raisin Bank: A New Option for Irish Home Buyers

Benefits of Raisin Bank for Savings

• Raisin Bank offers more favorable terms and conditions compared to traditional Irish banks, providing a wider selection of over 25 banks with both fixed-term and instant access savings accounts.

• Deposits up to €100,000 can be made in one go, with minimum deposits starting at just €1, allowing home buyers to earn higher interest on larger balances from the outset.

• There are no fees associated with using Raisin Bank, and deposits are protected under the European deposit guarantee scheme up to €100,000, similar to protections offered by major Irish banks.

• Interest retention tax (DIRT) is not deducted at source for these European savings accounts, enabling savers to retain more interest before declaring it on their tax returns.

• Signing up is quick and easy; customers can receive a €50 signing bonus by registering through provided links.

Current State of Housing Development in Ireland

• The lack of new housing construction is often cited as a key factor in the Irish housing crisis. Recent reports indicate that over 69,000 new homes began construction in 2024—the highest since 2006.

• However, this figure may be misleading as many commencements were driven by temporary government incentives aimed at reducing costs for developers.

• The BPFI report highlights that completion dates for many units commenced in 2024 will extend into 2025 and 2026 due to these incentives expiring soon after commencement.

Challenges Facing Housing Construction

• Despite increased housing commencements, actual annual completions may not see significant growth due to ongoing challenges such as funding shortages—estimated at €18 billion needed for building plans over five years.

• Efforts are being made to attract foreign investment into the Irish property market through events like MIPIM; however, there’s a misconception that such investments exacerbate the housing crisis rather than help resolve it.

Workforce Shortages in Construction

• The construction sector faces an increasing shortage of skilled workers. Young people tend to pursue university degrees or careers outside traditional trades like carpentry or electrical work.

• An aging workforce poses additional challenges as experienced workers retire without sufficient younger replacements entering the field.

Housing Market Insights in Ireland

Utility Connection Delays

• There are increasing delays in securing utility connections (water and electricity) for new housing projects, particularly with Irish Water, which is limited to connecting 35,000 new homes annually.

• This limitation necessitates further investment to increase capacity for utility connections.

Mortgage Market Developments

• A significant recent development in the mortgage market is Avant Money's introduction of the Flex mortgage product, marking the return of Tracker mortgages to Ireland.

• The Flex mortgage offers a variable rate tied to the 12-month Euribor rate, updated monthly plus a profit margin based on loan-to-value (LTV) ratios: 1.1% for LTVs over 80% and 0.9% for LTVs at or below 80%.

Competitive Rates and Transparency

• The current APRC is 3.58% for LTVs above 80% and 3.37% for lower LTVs, which are more competitive than rates from AIB, Bank of Ireland, and PTSB.

• Tying rates to an independent benchmark like Euribor enhances transparency and reduces conflicts of interest compared to standard variable rates set by banks.

ECB Rate Cuts Impact

• The European Central Bank (ECB) has cut rates seven times in the past year; the latest reduction brought it down to 2.4%, influencing Irish mortgage rates.

• As ECB rates decline, consumers can expect potential reductions in fixed and standard variable mortgage rates offered by Irish banks.

Future Projections and Challenges

• Forecasting suggests that ECB's main refinancing rate could drop as low as 1.75%, potentially lowering costs for home buyers with tracker mortgages like Avant’s Flex product.

• Despite these developments, Ireland remains one of the most expensive countries for mortgages in Europe due to high capital requirements on banks and challenges with property repossession.

Housing Supply Issues

• The introduction of Avant Money's flex mortgage alongside credit unions' ambitions aims to enhance competitiveness within the Irish mortgage market.

• Decisions on purchasing homes depend on personal circumstances; while lower mortgage rates may lead to higher house prices, supply issues persist due to labor shortages and financing challenges.

Renting vs Buying Dilemma

• Renting is becoming less attractive; between 2010 and 2024, rents increased significantly more than house prices in Ireland.

Current State of the Housing Market in Ireland

Overview of Housing Market and Financial Options

• Discussion on various housing schemes, including local authority affordable purchase schemes, highlighting their relevance in the current market.

• Inquiry into personal experiences regarding the housing market in Ireland, inviting insights from others about their perspectives and challenges faced.

• Mention of competitive alternatives to traditional banks (AIB, Bank of Ireland, PTSB) for saving towards a home deposit.

• Introduction to Raisin Bank as a potential option for individuals looking to save for a home deposit without incurring fees.