1 – Dublin Property Prices Historically

The ROI’s economy has returned to pre-covid levels and the ICB has stated in their latest quarterly report that domestic demand is predicted to grow by 7.1% this year. This has led some columnists to compare the current economy to that of the Roaring Twenties. Dublin’s skyrocketing property prices and rents, catalysed by internationally increasing construction costs have many people questioning, ‘Is the boom back?’

Source: Eurostat

Large increases in property values are a relatively recent phenomenon. During the 1708-1949 period, Dublin property prices increased by only ‘1.5 times in real terms’. Nominal property prices appear to be procyclical with the general Irish economy, rising during the relatively prosperous late 18th and early 20th centuries and falling during 19th century (primarily due to the Great Famine), which prices took almost a century to recover from. In real terms, property prices fell by 50% from 1900-1949 due to the very high levels of general price inflation, resulting in a significant departure from nominal prices, particularly from the ‘Roaring Twenties’ onward. Empirical pricing data appears to be consistent with similar studies in other countries which highlight the recency of significant property ‘bubbles’.

Source: Deeter et al (2016)

Partially overlapping with previously referenced literature, Lyons creates a Dublin housing price index for the period 1900-2015, finding that nominal prices rose by over 450x over the entire period, within a context of general price levels rising by 100x, concluding that real housing prices increased to around 3.5x their 1900 level. Lyons accredits notable increases in real housing prices in the 1920s, 1940s, 1960s and Celtic Tiger period to several determinants, including:

·         inflation

·         incomes

·         supply

·         user cost

·         credit conditions

However, he neglects to consider how marketability and speculation, as components of the ‘bubble triangle’, contribute to price movements or how stimuli such as government policy may have sparked price escalations.

Source: Lyons (2015)