A house in Rathmines in Dublin recently went on sale with an asking price of €685,000, but quickly attracted bids of over €1.2 million, nearly €500,000 over the asking price. This is not the only example of Celtic Tiger-style bidding wars in the Irish property market at present. Dr Rory Hearne from the Department of Applied Social Studies in Maynooth University and estate agent Clare Connolly joined the Drivetime show on RTÉ Radio 1 to discuss the reasons behind this phenomenon. (This piece includes excerpts from the conversation which have been lightly edited for length and clarity - full discussion below).
Aside from huge demand and low supply, Connolly feels these price surges are driven by panic in the market. "It's the panic and the perception out there that people aren't going to get onto the property ladder. They're terrified and go 'oh God, I don't want you to be left behind.' They're really panicking. If they could just stand back and take their time, just take their time, eventually supply will meet demand.
"The market will only pay what the market will pay. It's really a perfect storm Just to go back to that property in Rathmines. It might have been a little bit on the low side going to the market, but it has a stunning 60-foot, south-facing rear garden, side garage, there's so much room to extend and I know it's gone so far over the asking price but that really was an exceptional property."
From RTÉ Radio 1's Drivetime, will the government act to stop investment funds buying up housing estates?
Hearne says the current situation is "a social catastrophe" and believes we still have some way to go. "I think it is frightening what's happening right now. I said this was going to happen in terms of house prices were going to continue to rise in the context of the failure of government to build affordable housing and the entry of investment funds buying up and build to rent housing here. I think it is really a social catastrophe - we heard high-profile stories this week of young families being evicted from private rental accommodation. They can't make a home there."
He believes one of the big issues here is the presence of investment funds in the market. " We know investors are adding pressure to the prices. They are buying up apartments but they are also buying up houses and pushing up prices. There's no measure in place to stop investors buying one-off homes, for example, which is happening with secondhand homes. They are competing with home buyers around these as well. It's reported around Dublin that investors are buying up those homes as well so they're competing. The government's measures around increasing stamp duty clearly have not worked and are not going to work."
Hearne also points to the scale of affordable housing that the government is planning to build. "They've set out 4,000 units that they're going to build over the next four years. 4,000 units is a drop in the ocean in comparison to what's needed in terms of affordable house building. The biggest scandal is that with NAMA estate agents sitting there could be directed by the minister to fast track the building. They've 20,000 units essentially they could provide over the next two years.
"We have the ESRI saying that they could borrow the state could borrow four to seven billion additional to build housing. I don't understand why there isn't an emergency budget brought in by government to throw capital funding at local authorities and housing associations. We have a huge land bank so go build."
Hear the discussion in full below
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