There is good financial news and bad financial news to start off the New Year.
The good news is that Irish house prices are expected to go up again in 2019, according to two of the leading house price monitoring sites, and, in their annual, end of year reports.
They disagree – ever-so-slightly – about the size of house price inflation in 2018 with the former settling at about 2.9% and 3% respectively in Dublin in 2018 and 6.1% and 7.3% respectively for the rest of the country.
The good news, for house sellers, especially anyone trading down (good luck with that) is that house prices are nearly back at pre-2008 levels and a lot fewer people are in serious negative equity than they were even a few years ago.
However, the continuing, albeit slower rise in average national house prices in 2019 of an expected c4%-5% nationally (due mostly to an uncertain Brexit) will be just another red flag to first-time buyers who will have to find more money for their required 10% deposit if they are to secure a property.
The average house price in Ireland is now €254,000 according to and that means the new buyer has to come up with another c€1,000 for their downpayment if the desired property they chose late last year goes up another 4-5% (say, €10-€11,000) over the next year.
If the same buyer has their heart set on an average priced Dublin city property, currently estimated at €358,560 by, and it too goes up, say by 4%, which some commentators like Karl Deeter of Dublin Mortgage Brokers believe could be even higher if there is an influx of buyers from the UK due to Brexit, then that buyer will have to add another €1,434 to their downpayment, which is already €35,856.
But as we all know, money is the ultimate zero sum game and one person’s gains are often another person’s loss. Someone trading down to a less expensive area (say from south Dublin, Cork or Galway City to a rural area or even to another country as many pensioners do) will be the biggest gainers of all with an entirely tax free capital gain.
Even letting rooms out under the Rent-A-Room scheme in 2018 will bring higher gains as demand for affordable housing continues. According to Dr Ronan Lyons’ insightul analysis, while thousands of new, mostly private sector houses are coming on stream, too many are the wrong size and price: the greatest need isn’t for 3-4 bedroom suburban semi-d’s but for well-equipped and designed 1-2 bedroom apartments in the cities for singletons and couples (including downsizing baby-boomers.)Onto the bad news.
2018 proved a tough year for investors. (Savers too.)The markets have had the worst year since 2009 – the S&P down nearly 20%, the ‘bear market’ gauge – according to many commentators. These losses, they claim are a combination of QT – quantitative tightening by the US Federal Reserve in the forms of rising interest rates (but also inverted bond rates), the growing US deficit, Trump’s erratic trade policies and US policy uncertainty especially regarding China, which has sharply reduced its US bond buying, the soaring US deficit, weakness in the tech sector and lower consumer buying in the west (‘stuff saturation’ one broker described it) and of course, Brexit.
EU job creation and economic gains here and other EU countries has helped the decade-long recovery and debt reduction, but it has been unequal and erratic. The ECB hasn’t ended QE (quantitative easing) yet nor has it let its own base interest rate come off its 0% floor. A US recession means rate raising in the EU is even less likely in 2019. Some commentators doubt the Fed will raise rates again this year. In Ireland, due to new EU Mifid disclosure regulation, tens of thousands of investors, including private pension fund and ARF (post pension) holders with a higher degree of exposure to equities have received alerts from their administrators that their fund values are down by 10% or more in 2018.
It isn’t easy to see a big chunk of your fund wiped out – and I am one of them – but if you are a long-term investor (I am), you need a) to keep your nerve and b) seek both an explanation and reassurance from your adviser. And if you don’t have an experienced, impartial, fee-based financial adviser or planner now’s the time to get one. Check out the website of the Society of Financial Planners of Ireland ( for a planner near you.
This year may not be the financial rollercoaster ride that 2008 was, but you still want to be well-strapped in.
Letters to The TAB Guide to Money Pensions & Tax 2019 is available in all good bookstores. See for ebook edition.