Is Ireland’s property market competitive?

Ronan,
obviously you have access to more data than I do but I question the rental figure for a 120sqm apartment for Dublin. I really do. It strikes me as too low. There are problems in comparing Irish rents to some extent – out foreign I would have rented on the basis of sqm; in Ireland it tends to be on the basis of number of bedrooms. Either way, 120sqm apartment is bigger than the typical three bedroomed semi detached house which, from the experience of looking for one to buy, varies between 88-96sqm. An average rental of 1250E per 120sqm strikes me as overly low if houses are (in my area at least) a) smaller and b) trying to command 1300E a month. Where are these 120 sqm properties being used as a benchmark?

The other point I would make is that the graphs above are meaningless unless put in the context of net monthly income and general cpi. For me to take the conclusions here at face value, I’d really need to see the comparable incomes.

I should also state I’d welcome other data sources in general, as GPG may not be definitive.

For those curious about the criterion of 120sqm and in particular using that in Ireland, where people typically use bedroom number, not size, I have focussed on 3-bed and 2+ bathroom properties, which is largely in keeping with the GPG breakdown, which looks very like bedroom numbers, represented by square meterage.

Given the skew in Ireland away from apartments to houses, I have used an average over all properties, so small sample bias is less of a concern. This may actually skew up Irish cities, as there is a premium attached to houses over apartments.

Do feel free to note any other potential sources of bias. The aim is to be right, not to be stubborn!

Hi Treasa,
Thanks for that. I’m happy to re-run the numbers by focusing on a more expensive subset of South Dublin city, if people don’t think it’s currently like for like enough.

An alternative would be to up the property to a 4-bed, which might allay concerns about size, although as mentioned above I take the different sizes on GPG to represent broadly the different bedroom numbers.

As for income, can I postpone that one for another day? I do think it’s important, but the emphasis today was on the reverse: “We have 100 jobs, where can we go and get people easiest for an average salary of 50k, given local rents?”

Property is cheaper to buy and rent in Berlin than Dublin.

Dear Ronan I appreciate the source of those figures is GlobalPropertyGuide.com . I have some comments. The rents might have gone down but in Dublin it’s still too difficult especially for families in medium income to afford a decent home. 120 sq mt is a very big size,at the price shown in the graph you can rent something like that but for sure not that close to the city centre or to a good public transport link. Not to talk about Dublin South, still mad expensive.

Okay. I’ll give you the income – but I’m not sure that Dublin property is affordable on a salary of 50K rental or purchase unless you’ve double incomes….That aside…

One of the key difficulties in running comparisons of Dublin against other European location is the mismatch in property designs. Nothing so much blunt as houses against apartments – but it’s fair to say for the most part, our big apartments are not all that big and I suppose it would be interesting to get an overview on average property size in sqm in Dublin. Worth noting however that 120sqm is 50% bigger than the minimum size of a 3 bedroom apartment according to Dublin City Council building regs (which give a figure of 80 sqm). As such I really do stand over the view that 1250E for 120 sqm is too low and that a 120sqm building does not represent an average property in Dublin and we had building regulations for a long time that favoured buildings to be under 125 sqm using tax incentives. That tends to reduce the average as well. On the other hand, from the experience of living in a bunch of other European cities, I’d have some difficulty believing 120sqm is average for Paris, Frankfurt or Brussels either. Purely anecdotal, but…

I don’t know what I’m saying here other than “I think you’ll find it’s a little more complicated than that.” which is the worst response to statistics, I know.

I agree with Treasa, I fall in that category, unfortunately, of the 1 income families

Hi Ronan, you have highlighted an interesting phenomenon in the Irish rental market. The problem is not the properties at the higher end of the market – i.e. 120m places. Here you are saying that 120m 3 bed property rents for approximately 1200 euro. Therefore one would expect a 30m 1 bed property to rent for 300 euro. However it does not. It rents for 900 euro.

That is the problem with the rental market in Ireland. A false floor on the market is holding the smaller properties rental values way above any rational explanation. Care to explain why?

@ Karl – I think to answer you last point – It would the landlords dole – Social welfare Room allowance.

The “Hawks” are languidly circling as they eye up the snackbox far below. 🙂

I think it’s due to the rent allowances that are around 700/900 euro a month. People on allowance get really bad apartments whose landlords anything better is more expensive.

Ronan,
These figures are ridiculous. I can say from personal experience tat the figure for Milan is out of whack. Those prices are only applicable in the central areas of Milan. A bit like using only Knightsbridge to compute average property prices for London.

120m2 is very large for an apartment in Dublin. A 2 bedroom flat would normally only be 75- 90m2. Perhaps you have used data for 120m2 house. Other consideration that might effect results are local property taxes. Does the accom. costs include property taxes in the other countries?

http://www.mrlodge.de/srch/eng/3.0/9.0/Wohnung/

Apartments of that size in Central Munich (Schwabing for example) range from 3 to 4 bedroomed apartments – I have adjusted the search to 10km of Marienplatz, right in the center of Munich and the prices range from 1450pm (3 bed) – 3500pm (3 bed).

If you search Dublin City Center for 3 and 4 bed apartments rental then the cheapest is http://www.daft.ie/searchrental.daft?id=1012198. The cheapest Munich one http://www.mrlodge.de/app/2392/eng/index.htm

Then compare the most expensive http://www.mrlodge.de/app/5814/eng/index.htm
In Munich and the most expensive in Dublin
http://www.daft.ie/searchrental.daft?id=916031

You can make of this what you will Ronan but it is clear to me that the rental graph above, where it appears to show that renting a 3 bed apt in Dublin costs 1200pm against 2200pm in Munich is incorrect. What’s also really interesting in looking at the 2 cities (very comparable in size and population) is the amount of expensive property in Dublin – on that site (comparable to DAFT btw).

Comments please?

Thanks

I agree that a poor comparative has been made, really there should be an average rent similar to that published by the CSO or DAFT itself, the same demographic distributions are relevant. My own experience in Barcelona and Munich describes a tieres market, not sure what the average is for these cities but Barca was below, significantly, Munich approx the same but including utilities. Without such data this artcile should never have been published. So much for the impartial academia espoused by you Ronan, this is worthy of the property section in the Sunday Independent

Hi all,

Apologies for the silence until now. I think it’s fair to say that almost everyone who has commented, both here and on the dedicated thread on thepropertypin.com, is interested in getting better like-for-like comparisons across cities. I am too. To that end, there are two key issues I see emerging from the discussion: property size (and to a lesser extent type) and property location. Once again, as a quick reminder of the general aim: to compare the cost of a family residence in a nice part of town.

On property size, the issue seems to be: “the Irish residences you chose are not as big as those in other cities”. As we all know, Irish people are not particularly interested in square meterage (at least not compared to our European neighbours), so I chose 3-bed 2+ bath properties to compare with the 120sqm apartment. I did this because if one looks at the entire 2006-2010 daft.ie dataset of over 100,000 properties for which square meterage is available, the one closest to 120sqm was 3-bed, 2-bathroom (it averaged about 115m).

On location, the issue seems to be: “the locations you chose for Ireland are not as exclusive as those in other countries”. Part of this gets down to the underlying issue – is a company moving to any of these cities going to be able to get people to live in nice parts of the local town for cheap? But there is an underlying point: are the areas I’m choosing “exclusive enough”? That is probably mostly an issue in Dublin.

There were also a couple of comments on the source. On this particular topic, I had originally started researching this post by using a range of portal sites around Europe, such as immobilienscout24.de, pap.fr, immoweb.be, funda.nl, caso.sapo.pt, idealista.com, hemnet.se and vuokraovi.com. My worry with this method was that it was entirely dependent on my own personal judgement, particularly in relation to which district of the city to use. (As it happens, the results were broadly if not completely, similar, at least in order of magnitude… and I’d like to stress again that due to the obvious difficulties for exact like-for-like comparisons, I wouldn’t place too much weight on differences of less than €100 or even €200.) I think this is ultimately the “core competency” of GPG and thus they are more likely to be able to make like-for-like comparisons, but if there are better sources out there, I’m happy to use them too.

Solutions:
(1) On size, I can do another comparison, this time looking at say 60sqm apartments, which are less likely to be scarce than in all cities. (Unfortunately, this undermines my intention at looking at the cost per family, but if it strengthens the methodology, that’s probably a good trade-off to make.)
(2) On location, I can use Dublin 4 and Clontarf, rather than the South Dublin City region. This corresponds with GPG’s regions when looking at the Dublin market.
(3) On source, I do appreciate those who commented using individual property listings, but I think the best approach is to replicate as best as possible GPG’s methodology, using daft.ie data.

If I’ve left out any major issues, do remind me! And thanks one and all for the comments – nice to know I’m being kept on my toes!
Ronan.

“Once again, as a quick reminder of the general aim: to compare the cost of a family residence in a nice part of town”

I think that’s where the mistake is Ronan. The rental market here is completely distorted because of rent allowance.

I am finding in my area (small rental market) that because of rent reductions in 3 bed family homes, asking between 750 and 850pm – apartments are languishing on the market. The cheapest 1 bed apt in my particular area (short distance outside Dublin, considered “nice”) is asking 650pm – when you consider that you can rent a 3 bed for 100 euro more and share with 2 others you can see how this is distorting the market.

I have looked around a bit and can tell you that what is happening in my market is not unique, Lucan, Tallaght, Blanch – that’s just a quick glimpse.

Take that search and transfer it to Munich – within a 10 mile radius of Marienplatz the cheapest one bed apartment in 640pm – the cheapest 3 bed apt/house in the same area? 1200pm.

Extend the Munich search to 30km and the cheapest one bed is 590 and the cheapest 3 bed apt/house is still 1200pm.

There is no way on any part of Munich (I know people who live there) would you get a 1 bed apt for basically the same price as a 3 bed apt/house!

Does it mean that 3 bed family homes are underpriced? Or does it mean that one bed apts are overpriced?

Is there any city on your graph where there is a difference of 100 euro between a one bedroomed apartment and a 3 bedroomed house?

Thanks.

@Daltonm
It’s worth remembering what is and what is certainly not being argued here. You seem to be taking a position on whether the market is in equilibrium and/or is being interfered with through government interventions. This is not a post about those topics, not because they are not important topics, but because a firm investing in Europe has to take those factors as given and thus can only work with the prices/rents they see in the market today. On that question, the available evidence suggests that for family homes Ireland looks cheaper than many other eurozone locations. (This is subject to the caveats I tried to summarise in my last comment.)

Given that finding, your suggestion that Ireland could be cheaper still, at least in the one-bedroom segment, if rent allowance were not given, is worth bearing in mind when I add the 1-bed analysis to what’s been done already, as per my comments above.

R

It’s very selective evidence though. And just a query, on clicking into Munich the data is from May 2010 – yet when I click on Ireland it says “no data available” where do the Irish figures originate from?
Sorry if it’s right in front of me – I just can’t seem to find it.

Thanks for taking to time to answer.

No worries, the data I’ve used are from daft.ie – that was in a sense the “value add” of the post but also the caveat as we need to make sure this is a like for like as we can get.
R

What is often described as a “house” or “apartment” in Ireland can be extremely ambiguous. For example, 12 years ago, “apartment” indicated a dedicated multi-unit build, whereas “flat” generally indicated a Victorian conversion. Nowadays both describe themselves as “apartments” so you may be comparing apples with oranges.

But the most interesting thing is the lack of differentiation between rents in terms of property type. There is huge levels of homogenisation in the market still, despite enormous variance in quality between different properties, and there is still a large amount of very poor quality rented accomodation available, which interestingly, landlords either seem to be able to rent quickly or able to sustain long term vacancies.

From what I can see, the bigger the landlord in terms of number of properties owned, the higher his/her overall rents as he tries to leverage the profits from properties with higher equity to compensate for losses on those with low or negative equity. Most definitely seem to prefer sitting on long term vacanices rather than drop rents infititely, I suspect for fear of allowing the market to drop completely.

Another trend I’ve spotted is that some landlords are dumping their older, high equity (i.e. owned outright or pre-96 mortgages), but very substandard properties onto the selling market rather than bear the costs of upgrading, which is why I think there is a lot of shabby homes for sale at what appear to be bargain prices.

Its debateable though, to say if a 1200 a month rent for a 3 bed place is “good value”, as a family tenant would still need to have earnings netting 3600 month after tax if a single earner or about 5000 if dual income in order to afford the rent and living costs for a small family, not to mention the risk of future rent hikes like those that occured at the end of the 90s.

Alfredo: rent allowances for single people don’t come anywhere near 700-900 per month. The maximum is around 120 per month which indicates a rent of 500pm.

Either the tenant/landlord are underdeclaring the rent and the tenant is paying cash to the landlord or the rent have been held low to hang onto a long term tenant.

12 years ago 500pm (well about 85 pounds in old currency) would have been considered a reasonable rent in most of Dublin for a small 1 bed or studio, and I suspect that most RA tenants are either families with bigger allowances, or living in rural properties where rents are much lower.

you think dublin compares favourably in term of rents but you have to consider the laws in other countries that protect tenants. A landlord can ignore your complaint here

Hi Sinead,
While the primary purpose of the post was to look at the cost of accommodation from a firm’s perspective, you raise an important point, namely about tenant rights.
Actually, Ireland’s tenant rights are notoriously underestimated – if you are a long-term tenant in Ireland, you have significant rights. But this is not the experience for the vast majority, who tend to live on rollling 12-month contracts and move address every couple of years.

Thanks for the comment,

Ronan.

Very surprised & doubtful of Berlin’s position in the rental graph, one of the cheapest cities to live in Europe, let alone the conclusion that Dublin is the cheapest capital in Europe to rent in.

Also, as mentioned, the fact that only 120 metre apartments are being looked at, more than skews the real picture. 1 & 2 bedroom apartments are the bread & butter of the apartment rental segment in Ireland, and these graphs do nothing to take a/c of that.

Interesting article, but not representative of the overall market, in my opinion

Hi Damien,
Thanks for the comment and the politeness!
The important point to make – and one that I didn’t make clear or maybe even appreciate fully myself when writing the post – was that GLG were looking at the top end of the market, the areas an executive ex-pat might move to. So, as per one of my comments above, I plan to re-run the analysis and look at Clontarf/Dublin 4, rather than South Dublin city which is Ireland’s most expensive region but also includes some cheap areas.

On the apartment size, the issue here was to try and compare like with like across very different styles of living. I’ve used 3-bed, 2-bath because on average in Ireland they are about 115 square metres. I’ve included houses because apartments are not “the done thing” when you’ve a family in Ireland, but in many European cities, very few families live in houses as we think of them.

Anyway, it’s by no means an open and closed case but hopefully I can do one or two “robustness checks” on the results, as per one of my previous comments, so we at least know if this holds for, say, 1-bed apartments as well as 3-bed ones.

Thanks again for joining the discussion,

Ronan.

Hi Ronan,

Interesting piece (hat tip to JTO on irisheconomy). Just looking at the numbers, on the same research site they quote an average price/meter – http://www.globalpropertyguide.com/Europe/Ireland/square-meter-prices. The picture there is closer to what intuitively I would have guessed. Although the numbers look excessively high to me, the country rankings look closer. Any idea why there is a discrepancy between those numbers and the ones you used?

Thanks,
JC

An unedited comment from a reader who emailed me:

“I have been following the Irish property market for the last ten years or so with great interest and during that time it provided amusement,shock,awe,disbelief,bewilderment and sadness during its wild ride. I say this as someone who at one time held the hope of retiring to Ireland at some time in the future.
You asked for data and here it is. I still think Irish prices, particularly Dublin, especially south Dublin are massively overpriced. They may have fallen 50% from the peak but are still roughly double the price of property in Birmingham England(the countries second largest city) where I live. Here are two examples. I have chosen Rathmines as the Dublin suburb as it is a good barometer of higher end middle clas properties,a typical 1930’s semi is 495,000 euros that at todays exchange rates (0.87 EUR/GBP)equates to £430,000.The area in south Birmingham is Shirley,with a similar demographic to Rathmines,as you can see a similar property can be bought for just £190,000,that makes the DUBLIN SEMI 126% MORE EXPENSIVE!!.Another way of looking at it was to look at what you could buy in Shirley for £430,000,well that was difficult as there are no properties available!You have to go to neighbouring Solihull(the most expensive area of southern Birmingham to find any)and for this money you can get a FOUR/FIVE BED DETACHED!!!!As you can see the quality of the property available for this money bears no relation to that of the one in Rathmines.

RATHMINES:
http://www.daft.ie/searchsale.daft?id=570466

SHIRLEY:
http://www.rightmove.co.uk/property-for-sale/property-28396657.html

SOLIHULL(VARIOUS):
http://www.rightmove.co.uk/property-for-sale/Solihull.html?minPrice=400000&maxPrice=450000&index=10

So my point is,Dublin is completely off the scale of expensive,and quite frankly I cannot see proprty prices being allowed to fall further by the ECB or the government in Dublin.This of course,with reference to your article on the price of property affecting Irelands competitiveness can only mean one thing -it will remain extremely expensive for companies to remain in Ireland and pay the wages necessary to support such an inflated property market,new companies will locate elsewhere.”

I have been wanting to return to Dublin to live. Why? Because i happen to like the place. However, the prices for property being currently asked are fairy tales. Flats and apartments are out because of maintenance and service charges that cannot be relied on. Property outside of Dublin is out due to poor infrastructure and the high cost of fuel and the taxes on owning a car – road tax, insurance. etc. Property standing idle for a year may be in rag order, particularly as the current owner may not be able to afford to maintain it. And the nagging doubt that things may get worse. Sorry but home owners have to get real and consider whether they will get anything and start from there.

[…] as explained before, has an impact also on the salary you demand. This might not work directly all the time. Most […]

@TREASA: I checked the website of GPG and found out that they have prices for smaller apartments as well!!! i.e. 30sqm, 50sqm, 75sqm. It took me half of the day browsing the GPG site because it seems to me that they cover almost every country in Europe and in each country, they have a “Rental Yields” table where you can see the price/sq m and the monthly rent of apartments of every size.

Example in Denmark, GPG has the price/sq m and monthly rent for 45sq m, 80sqm, 120sqm, etc. http://www.globalpropertyguide.com/Europe/Denmark/Rental-Yields

GPG also covers China, Brazil, Israel. LOL =))

hmmm…i entered the wrong email in my first post so i am resending this now

@GARO: The price per sq m in MILAN as quoted in GPG are as follows:
50 sq m EUR 6,250
85 sq m EUR 6,831
120 sq m EUR 6,874

Covered areas of MILAN: Centro Storico, Brera, Fiera, Montenapoloene

This explains why you think “figure for Milan is out of whack”. Cheers!