The Republic is now the second most expensive place in Europe to buy a house, according to data published by a major international brokerage. A typical urban home costs more than 18 times average annual disposable income, compared with just 8.3 times in the United States and 10.5 times in Belgium.
The figures, published by Dresdner Kleinwort Benson, will add to the concerns of the Central Bank, which last month warned of the dangers of an inflationary spiral of house prices and wages.
In 1989, according to the data, a typical urban home in the Republic cost 11.3 times average annual disposable income. At that time, the figure meant Irish homes were among the cheapest in Europe. Only houses or apartments in Belgian and Danish cities were less expensive, at around 91/2 times disposable income. Since then, however, Irish prices have soared, and now cost 18.2 times income. Only the Netherlands, with a ratio of 19.1, has more expensive homes in Europe.
Real housing costs in most countries have stayed relatively stable, or even dropped, over the past decade. The average for the euro zone fell from 15.6 times disposable income to 14.7.
In France prices fell from a figure of 14.2 to 12.3; in Italy the cost also fell, from 19.1 times income to 14.6. Spain saw a drop from 19.1 to 15.4. Real prices rose slightly in Germany, to 15.9 of average annual disposable income from 14.7; and in Belgium, to 10.5 from 9.6.
The Irish figures trace an almost exactly opposite path to those of Britain. A decade ago, at the height of the London property boom, a typical urban home in Britain cost 18.6 times average disposable income. Today the real price of the same home is around 12.7. Outside the European Union, Japanese homes are still exorbitantly expensive, at 26.1 times average disposable income. But the crash of the Asian economies can still be seen in the figures. A decade ago comparable Japanese homes cost a massive 67.4 times income.
In its notes on the figures, Dresdner Kleinwort Benson pointed out that the measurement standard size it used for apartments and homes in all countries was 100 square metres. "Our Tokyo real estate analyst warns, however, that . . . [such an] apartment in Tokyo would be seriously large," the brokerage says.
Houses and apartments in the United States, however, which cost 9.7 times income 10 years ago, still appear to represent good value for money. Today the same US homes cost just 8.3 times average annual disposable income.
In its annual report the Central Bank last month warned that the price of housing in the Republic could drive wage demands, and provoke an inflationary cycle. The governor, Mr Maurice O'Connell, said he was concerned that some of the banks and building societies were breaching the traditional guidelines for loaning money.
Some lenders argue that the current rules - allowing a loan of 21/2 times gross income, plus the annual income of a partner - are no longer appropriate in an era of low interest rates. However, the latest figures will strengthen the position of those economists who argue that borrowers must be left with a reasonable disposable income after loan repayments.