It is now taking eight times the average income to buy an average-priced home, according to a quarterly report from the property website MyHome.ie.
The pace of property price rises has eased, with a large factor being that fewer people are now able to afford a home.
Asking prices rose by 5.7 per cent in the three months to September compared to the same time period last year. This is down from an increase of 7 per cent in the period from April to May this year, with 5.7 per cent being the lowest rate of increase seen in nearly two years.
In the three months to September, asking prices were down by 0.4 per cent when compared with the second quarter.
An analysis of the MyHome figures by Bank of Ireland economist Conall Mac Coille shows that the average salary is close to €53,000 a year. Meanwhile, the average household purchase price for a residential property is now €426,000.
The eight times average salary it now takes to buy a home is at the highest level seen since 2009.
“Hence, the house price-to-income ratio now stands at eight times. By this measure, affordability is now back at its most challenging level,” said Mr Mac Coille. He added that affordability has become more stretched.
“Why is house price inflation slowing? First, affordability has become more stretchded,” his analysis explains. “Second, the past two years saw first-time buyers taking on mortgage debt following the relaxation of the Central Bank lending rules. That process has now largely played out.”
The report found that competitiveness for homes remains high. Outside Dublin, asking prices have seen a rise of 6.2 per cent compared with a 4.8 per cent rise in the capital.
First-time buyers have drawn down 27,000 mortgages over the past year according to the report, which is the highest level since 2007.
The median, or typical, asking price is €385,000 nationwide, up 5.7 per cent on last year. While in Dublin, the median asking price has risen by 5 per cent since last year to €475,000.
Mortgage rates are now at their lowest level since March 2023, according to the report, with rates falling in August to 3.58 per cent, according to data from the Central Bank.
“Perhaps the most striking news since our last MyHome report is that Ireland’s population grew by 1.9% pace for a second successive year, to 5.38 million in 2024. We have not seen population and economic growth at this level since the Celtic tiger era, and as a result the housing market is being put under intense pressure.
“A simple way to illustrate this is to ask how many homes Ireland would need to build to match the UK’s housing to population ratio. Our report shows that to ‘catch up’ with the UK’s housing stock would now require an additional 206,000 homes, versus 138,000 in 2020.”
He added: “New instructions for sale in Q3, were up 2% on the year, but remain depressed. The overarching concern is that the tight housing market is now feeding on itself, with would-be vendors put off by for fear of failing to secure a property once they sell their own home.
He said that despite extremely challenging market conditions, with intense demand and a sustained lack of adequate supply, it was promising to see housing starts rise to 49,000 in the year to July.
“However, the rush of activity prior to the expected expiry of waivers on local authority development levies and infrastructure charges means it is hard to gauge when these starts will translate into completions. Still, housing activity has held up far better than expected to the threat to viability from build cost inflation and elevated energy costs.”
He concluded: “The broad message from the MyHome asking price data is that the CSO’s official measure of house price inflation, based on transactions, looks set to peak in the coming months. That said, residential property price inflation was 9.6% in July, ahead of our MyHome figures, because homebuyers are increasingly paying over and above the original asking price. Nonetheless, we still expect RPPI inflation to fall back in the coming months, and finish 2024 at 7.75%.”
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