Irish home prices rose at 16 percent in 2014. That gain was the best in the world. Ireland had experienced a big bubble and burst, but the climb since then has been consistently one of the best. It is also why the broader Irish economy is projected to grow much faster than the rest of Europe.
According to a major real estate firm based in Britain, the home prices moved this way in 2014: See the full list of countries here.
Irish took a drastic step during the recent past financial crisis that nearly all other major countries did not do. Government spending was slashed, government employee salaries were cut, and it raised taxes to help balance the budget. The short-term pain was going to be acute. But it realized there will be long-term gains. The long-term gains are already here in terms of rising home prices, rising employment, and rising economy.
The fast-rising home prices in Ireland (though still well below the prior bubble-peak) are due to many years of under-construction of new homes. Now that the economy is rising and employment gains solid, more construction needs to take place from low inventory conditions. This story sound familiar. America has been under producing new homes in recent years. Inventory levels are low. Prices are rising in the mid-single digits. But is it on the verge of accelerating into double-digit rate of appreciation as occurred last year in Ireland?
A crucial turning point in the rich history of Ireland was when St. Patrick escaped slavery many centuries ago and arrived on the island to spread the word of the Bible. Another significant moment was when the island became free and sovereign after the First World War. The process was not easy, as the largely Catholic country wanted the whole island free while the Protestants in the northern portion continued to wish to be part of Britain. In the end, however, Ireland did free itself. In the very first presidential election, the Irish people elected a Protestant. That an overwhelmingly Catholic country could freely elect a Protestant was evidently a major signal that people could overcome their fears. Economies prosper when people do not fear. That is why people in Ireland now have a higher per capita income than those in Britain. America at first could not accept a Catholic Presidential candidate so voted solidly for Herbert Hoover. Later, America did elect JFK – signaling no fear of religion and economic prosperity.
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.