Are house prices overvalued? History suggests otherwise
PROPERTY
Property Insights with Johnny Gannon, Fair Deal Property
Last week’s ESRI estimate that Irish house prices are 17% overvalued makes a powerful headline. For a couple hoping to buy in Tuam, it can also send a misleading signal: wait, and homes will get cheaper.
The ESRI compares prices with economic fundamentals, including incomes, interest rates and supply. That identifies a real affordability problem. It does not establish that a home in Tuam will be cheaper next year.
Supply and demand set the price a buyer actually faces. Incomes and credit shape that demand, but scarce homes do not become cheaper simply because they look expensive against earnings. Such overvaluation estimates can coexist with rising prices across decades.
Britain shows how long the problem can last. The Barker review identified persistent inadequate housing supply in 2004. Parliament is still discussing how to tackle it. Meanwhile, house prices have risen by a factor to 2.5.
In 1997, average homes cost less than five times earnings in 88% of English and Welsh local authority areas. By 2025, that was just 7%. Britain has had downturns, yet its affordability problem has endured. The warning is clear. Waiting for the market to correct itself is a gamble not worth taking.
Ireland completed about 36,000 homes in 2025, against industry estimates of annual demand exceeding 56,000. We are failing to meet current housing demand, and the shortages are being compounded into the future.
For Tuam and north Galway, the stakes are personal: the ability to settle near family, recruit staff locally, and secure a suitable home without depending on parental wealth.
Budget 2027 should address that shortage through enabling serviced land, the provision of a partial credit guarantee to help viable smaller builders secure finance. Along with supporting the development of suitable homes for downsizers, releasing family homes.
My advice is not to make plans based on ESRI headlines. Otherwise, couples may postpone buying in expectation of cheaper homes, only to discover that the shortage has outlasted another year of renting and saving.
For buyers, the focus should turn to finding a suitable home and securing finance with repayments they can comfortably afford. An ESRI overvaluation estimate alone is no reason to abandon that opportunity.
Do not put your life on hold waiting for a headline to become a reality. History suggests otherwise.
For more information call 093-59014 or visit www.fairdealproperty.ie.