Residential property prices in Ireland are approximately 17% higher than can be justified by economic fundamentals such as income levels, mortgage interest rates, and demographic trends, according to research published by the Economic and Social Research Institute (ESRI).

The report indicates that overvaluation in the Irish residential market has increased from previous estimates of 8% to 10% recorded in late 2024. Despite the rise, the economic think tank emphasized that current market conditions differ fundamentally from the property bubble of 2006, when overvaluation reached over 40% prior to the global financial crash.

Unlike the pre-2008 crash, which was fueled by rapid credit expansion and relaxed mortgage lending standards, the ESRI attributed current price levels primarily to severe housing supply deficits and declining affordability. While property prices have continuously outpaced wage growth since mid-2013, Irish households are currently operating under stricter macroprudential lending rules and maintaining lower credit leverage.

Dr. Paul Egan, senior research officer at the ESRI and co-author of the study, noted that the disparity between market prices and underlying economic indicators is placing the heaviest strain on middle-income buyers. He stated that the gap is driven by property prices rising faster than household incomes alongside higher mortgage rates, which have constrained purchasing power.

The institute concluded that while the 17% overvaluation points to heightened imbalances within the real estate sector, the overall financial system remains structurally more resilient than during previous downturns due to cautious lending practices.