Current trends in the Dublin residential property market August 2023

I’m just back from my holidays in France so it’s a good time to review current trends in the Dublin residential property market as we move into the busy autumn season. As estate agents my colleagues and I have learnt to accept that there is always going to be some level of uncertainty, when there was none!

At the start of the year in our outlook we stated that Dublin property values could go one way or the other. After all, property prices have fallen in many developed property markets including the UK, America and Australia. In Sweden, property values have fallen 15%! There are many reasons why these markets have seen a fall in value. The most common reason was probably the continued increase in interest rates. However, in our core markets our transactional data confirms trends we saw in the prime Dublin residential market last year continued into the first six months of 2023.

Property values in our core markets are up over 2% in the first six months though the rate of price inflation has cooled compared to the same period last year when price inflation was running at double digit rates. So why is this happening? Quite simply, the supply of properties for sale is not meeting demand, especially on houses that are in turn-key condition and ready to move into. The economy is performing well and a lot of wealth has been created in the last ten years. A large number of buyers are looking for the same type of house in the same neighbourhoods. In many cases these are the same neighbourhoods these buyers grew up. Many expats living in Dublin for a number of years, initially renting in the city centre, are now starting to buy in large numbers as Dublin has become home.

From a seller’s point of view, the market has performed remarkably well despite the rise in interest rates underpinned by a lack of supply. 41% of our buyers so far this year required no mortgage funding, so interest rate rises are not impacting many of our buyers. As always, different price tiers, properties and locations have performed very differently. Houses in turn-key condition and close to amenities continued to be in high demand and sold well, once priced accurately. Rent controlled apartments and houses requiring significant refurbishment were much more challenging to sell.

In the first six months of this year our average selling price was €551,478 or €639 per sq. ft. Dublin 6 was the highest average selling price at €760,000. Average selling prices were 4.1% over asking prices, similar to the figure of +4.6% we recorded in H2 2022 but lower than the 5.2% we saw for the same period last year. So, year on year price inflation has cooled. On houses over €1 million our average selling prices were 9.8% over asking. 63% of our listings were agreed above asking, compared to 81% last year.  Demand was strongest up to €500,000 where first-time buyers were most active, and they accounted for 70% of our owner occupier buyers compared to 48% last year. Our average selling times were fast at 7.3 weeks. Some houses in Dublin 4, 6 and 8 in turn-key condition were selling in a couple of weeks and as much as 20% above asking.

Our typical buyer is 39 years of age and Irish. However, 42% of our buyers were not born in Ireland, an amazing example of how much Ireland has changed in recent years.

Investor demand has remained steady at 22% of our buyers. Worryingly, the number of landlords selling has accelerated, and they accounted for 73% of our sellers compared to 48% last year, and this is the highest figure we have ever recorded. There are many reasons landlords are selling. The most common reason is the rent many landlords can charge is well below market due to rent pressure zone caps, in some cases as much as 50% below market rent. When factoring in inflation this has significantly eroded the returns for landlords and too many are actually suffering losses. The government needs to act now with measures that will both encourage landlords to stay in the market and for others to invest. Measures need to be meaningful, and in our opinion only a significant reduction in the tax rate will have any clear impact.

In the rental sector our average monthly rent was €2,521. Our typical tenant is 35 years of age, non-Irish and on a salary of approximately €70,000. Ten years ago, our typical tenant was 28 years of age. In H1, 57% of our tenants were working in the technology sector, lower than the 65% we recorded in H2 2022 as hybrid working practices have had an impact. Job losses and a freeze on recruitment has alleviated the pressure a little on the rental market.

We are seeing an increase in demand from tenants for rentals with on-site amenities like gyms and cinema rooms. Our recent and successful launch of new apartments at One Lime Street by DubLiv is evidence of this. However, the PRS (Private Rental Sector) is increasingly getting competitive. For example, in the Dublin Docklands there are currently four new developments quoting similar rents and seeking the attention of a small pool of tenants. As a result, some asking rents have softened as landlords seek to occupy vacant apartments. This seems to be obvious evidence of how we can cause rents to stop rising and perhaps even fall: supply, supply, supply.

Looking forward to rest of the year it would really depend on supply as demand is very robust. Hopefully supply picks up and price inflation continues to cool.

If you are looking for any property advice in 2023, please get in touch and I would be happy to help.

Owen Reilly, August 2023.