Ireland Sees Lowest House Price Inflation in Euro Zone

Ireland has recorded one of the lowest rates of house price inflation in the euro zone during the second quarter of this year. According to Eurostat, the owner-occupied housing price index rose by just 3.5 percent annually, far below the euro area average of 4 percent. Only Luxembourg, France, Belgium, Slovenia, and Finland saw smaller increases, with Luxembourg even experiencing a decline of 1.7 percent.

The quarterly increase in Ireland was even more modest, at 0.7 percent, half the euro zone average of 1.4 percent. This data supports recent claims that the Irish housing market is softening. A report from property website Daft.ie showed that house prices in Ireland rose by only 3 percent in the year to September, significantly lower than the rate seen a year earlier. In Dublin, prices increased by a mere 0.8 percent, the slowest rate since 2020.

The slowdown in price growth has been attributed to expectations of higher borrowing costs, as the European Central Bank continues to raise interest rates. A global bond market sell-off has also contributed to rising borrowing costs. In the euro area, loans with an initial fixed-rate period of 10 years or more increased by 8 basis points to 3.43 percent in August, with further rate hikes expected.

Ireland’s housing market has also been challenged by a shortage in supply. The Economic and Social Research Institute (ESRI) forecasts that only 39,200 new homes will be built in 2026 and just under 40,500 in 2027. The government aims to construct about 300,000 new homes between 2025 and 2030, a target not seen since the Celtic Tiger era. However, industry leaders argue that the government has the right policies in place to deliver 50,000 homes a year, citing recent changes in design standards, rent rules, and VAT reductions on new builds.