Dublin house prices 10-25% above affordable level, says study

Dublin house prices appear to be 10-25 per cent above affordable levels, with price rises in the upper end of the market driving average price increases both in the capital and the rest of the country, a new study has found.

Dr Kenneth Jordan of the Department of Transport looked at residential property prices in Dublin and nationally from the viewpoint of mortgage affordability and found that, depending on the data source, differing trends have emerged.

House price data from the Department of Environment, Community and Local Government, the Central Statistics Office and the Property Services Regulatory Authority's Property Price Register (PPR) each tended to produce different results, he pointed out.

However, using PPR data, Dr Jordan found increases at the upper end of the market was pushing up the average prices.

Speaking at the Dublin Chamber of Commerce 37th annual economic policy conference yesterday in Cork, Dr Jordan explained his study looked at affordability by measuring property price or cost of mortgage repayments relative to income.

Looking at the percentage of household income that would be spent on typical mortgage payments, Dr Jordan found housing generally was affordable at a national level, but above accepted measures of affordability exist within Dublin.

Mortgage repayments

Using PPR data from 2013, Dr Jordan calculated the income necessary to meet mortgage repayments for 90 per cent of the cost at 5 per cent interest over a 25 -year mortgage.

Operating on the premise that mortgage repayments account for 30 per cent of disposable income, Dr Jordan found a Dublin housebuyer would need an income of €66,572 to buy an average house there, compared to €32,042 for a housebuyer outside Dublin.

Carrying out a similar analysis based on the premise mortgage repayments account for 25 per cent of disposable income, he found a housebuyer in Dublin would need an income of €79,887, while a non-Dublin housebuyer would need an income of €38,450.

Depending on which premise was applied – 30 per cent or 25 per cent – Dr Jordan found that Dublin house prices appear to be between 10-25 per cent above affordable prices.

The conference also heard from IBEC senior economist, Brian Mandt who argued non-financial Irish companies needed to diversify their external financing as the sector is heavily dependent on financial institutions relative to other economies.