Ireland’s house prices are about 17% above the level justified by economic fundamentals — incomes, interest rates and population trends — according to the Economic and Social Research Institute (ESRI). The figure is up from roughly 10% in ESRI’s previous estimate in December 2024. Report author Dr Paul Egan said: “Our analysis shows that Irish house prices are significantly above what economic fundamentals would suggest, driven by prices rising faster than incomes and higher mortgage rates, with middle-income households bearing the greatest burden.”
ESRI said middle-income households face the sharpest affordability squeeze, because the gap between house prices and their incomes is proportionally the widest of any income band. Separately, Ireland’s Residential Tenancies Board (RTB) recorded average rent for a new tenancy at €1,839 a month in the first quarter of 2026, up 9.1% year-on-year — a rise that came despite rental-market reforms that took effect on 1 March.
ESRI drew a clear line between today’s overvaluation and the run-up to the 2008 financial crash, when prices peaked more than 35% above fundamentals before later falling to about 20% below them by 2012. Dr Egan told RTÉ’s Morning Ireland the current episode is “an affordability problem,” distinct from 2008 because it stems from a housing shortage and rising mortgage costs rather than the loose lending and rapid credit expansion that drove the earlier bubble. Household debt levels remain well below pre-crisis levels, which both ESRI and Irish Times reporting attribute in part to stricter mortgage lending rules introduced by the Central Bank of Ireland after the crash.
Taoiseach Micheál Martin defended the March 1 rental reforms, saying the housing shortage remains the main driver of costs and that the government is making progress on construction while wanting more homes built this year. Social Democrats housing spokesperson Rory Hearne criticised the reforms, describing the rental market situation as “Armageddon” and calling for the March 1 changes to be reversed.
References
RTÉ News – Irish property prices overvalued by 17%, ESRI finds / The Irish Times – Irish house prices overvalued by 17% with middle-income households hit hardest / The Irish Times – Sharp rise in rents charged to new tenants as reforms took effect, RTB reports
