Housing market equilibrium missing it’s mark

According to the most recent Real Estate Alliance house price survey, Dublin’s property prices have decreased by €7500 in the last quarter. Additionally, the price of a three-bedroom semi-detached home on average has decreased by 1.7% since the end of December 2018.

Although these numbers seem to be a sign of positive economic advancements, there are a multitude of barriers that keep the people of Dublin from having a choice in regards to their current living situation.

One of the largest obstructions for both home buyers and banks is the ominous outlook of the Irish economy post-Brexit. Without a clear idea about how the UK’s secession from the EU will affect the Irish Market, banks and buyers alike are being cautious of how and when they give out their money.

For the most part, housing purchases below €350,000 have still been steadily occurring due to affordability of loans and sheer price of the home. This combination allows for increased certainty for banks that their consumer will be able to repay their monthly balance across the term of the loan.

Although there is still active participation in the exchange of houses in the market, there has been a steady decrease in transactions that occur above €350,000. This is primarily due to the higher amount of uncertainty that comes from these hefty mortgages.  

What is fascinating is that the more traditionally well off consumers are more likely to be impacted by this frugality of the lending system. Many residents of homes that exceed €350,000 are given few options if they are interested in changing place of resident in the near future.

Their primary issues are lack of consumer demand for the amount of supply, which is predominantly affected by the inability for consumers in similar income brackets to obtain a substantial loan. Without having the funds available to promise full and timely payment, there is little capacity for movement in any housing contract.

Little mortgage approval in the higher purchase decreases demand, but does nothing to supply. This interaction causes the equilibrium prices of these higher valued homes to decrease, forcing homeowners desperate to move to decrease their home price into the below €350,000 bracket, which could possibly cause thousands of dollars in loss.  

While the higher costing homes face a decrease in demand, homes in the traditionally more affordable sector face the exact opposite problems. Currently, the housing market is facing a shortage in the amount of “affordable” homes in the city of Dublin due to the increased amount of demand for homes within that range.

In order for the market to fall back into equilibrium, there must be sufficient changes in the current loaning system across Ireland, but especially within Dublin.

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