Ireland v Spain: Property Markets Signal Fundamentals-Linked Growth Potential

by Bregs Blog admin team



Here on the BRegs Blog we are big fans Dr Constantin Gurdgiev’s blog “True Economics”- click blog here. In the following post he examines possible factors behind Ireland’s recent robust growth in residential property prices. Two factors indicate that recent growth is not a result of either current government policy to stimulate the construction sector or potential “bubble” dynamics. Although not directly related to BC(A)R S.I.9, upsurges in values can incorrectly be quoted as proof of successful government stimulus policies.

Rather the current upsurge may be a leveling-off of a previous over-correction in the market. To illustrate the point he compares Ireland’s property market to that of Spain.

Link to blog here:



13/7/2014: Ireland v Spain: Property Markets Signal Fundamentals-Linked Growth Potential

Two charts showing why Ireland can expect more robust correction in the property prices post-crisis trough:

First, investment in new construction:

investment in construction

The above shows that Irish construction investment dropped more significantly than in the case of (relatively comparable) Spain. This implies that we have been facing longer and deeper reductions in new stock additions than Spain, implying greater pressures on new supply.

Second, House Price to Income ratios (ignore caption):

house price income

Irish property prices have fallen more relative to income than Spanish prices. Which implies that penned up demand is greater in Ireland.

So there you have it, two (not all, of course) fundamentals driving prices recovery up in Ireland and both have little to do with the potential bubble dynamics.

Note: above charts are from IMF’s Article IV Consultation Paper for Spain.

Other posts of interest:

Commencement figures- June 25th 2014 – click link here

‘Recovery’ is Still Worse than the 1980s Crisis – click link here

Commencement notices- Building Register @ 17th June 2014 – click link here

Press: Construction and property bouncing back as jobs surge – click link here

Engineers Ireland CPD 10th June – click link here

Press: Fears construction recovery will stall – click link here

CIF Construction Confidence Survey – click link here

Irish Times: Dramatic fall in number of buildings being started – click link here