The Irish housing market is characterized by a level of stress and opacity that is pushing buyers to overbid and navigate a system they don’t fully understand, according to new research from the Economic and Social Research Institute (ESRI). The study, funded by the State’s Competition and Consumer Protection Commission, reveals significant gaps in public knowledge regarding rights and responsibilities within the home-buying process, alongside a worrying trend of escalating prices driven by competitive bidding practices.
The ESRI’s findings, based on a nationally representative survey of 800 adults who participated in a controlled auction experiment, alongside detailed surveys of buyers and sellers, highlight a market where ’s purchasers are increasingly vulnerable to overpaying for properties. The research demonstrates that even when buyers anticipate a fairer system through visible online bidding, prices tend to be *more* inflated than under other processes.
Overbidding and Auction Dynamics
Participants in open house auctions, the study found, are particularly susceptible to “auction fever,” exceeding their initial budgets and bidding higher than their assessment of a property’s true worth. This behavior suggests a psychological element at play, where the competitive environment overrides rational financial decision-making. The ESRI’s Behavioural Economics Unit, which conducted the research, points to a systemic issue where the bidding process itself contributes to price inflation.
The prevalence of overbidding is particularly concerning in the context of Ireland’s ongoing housing crisis. While the study doesn’t directly address the root causes of supply shortages, it underscores how existing market mechanisms can exacerbate affordability challenges. The tendency to overbid effectively prices more potential buyers out of the market, further constricting access to homeownership.
Knowledge Gaps and Consumer Vulnerability
Beyond the issue of inflated prices, the ESRI’s research reveals a concerning lack of awareness among buyers and sellers regarding their legal rights. While a majority (over two-thirds) correctly identified that it is illegal for a seller to accept multiple deposits for the same property, awareness of other crucial aspects of the process remains low.
Notably, only one in five respondents knew that estate agents are legally permitted to continue marketing a property even after it has reached “sale agreed” status. This lack of understanding can leave buyers in a precarious position, uncertain about the security of their pending purchase. Similarly, most people were unaware that a buyer can withdraw from a sale without penalty before contracts are formally signed – a critical piece of information that could mitigate financial risk.
Dr. Deirdre Robertson, Senior Research Officer at the ESRI, emphasized the implications of these knowledge gaps. The findings show that people are navigating a system they may not fully understand and increasingly experiencing stress, especially delays to conveyancing.
This underscores the need for greater transparency and consumer education within the Irish property market.
Rising Stress Levels and Conveyancing Delays
The study quantifies the increasing stress associated with buying a property in Ireland. Our findings also suggest that the most commonly used bidding systems encourage people to overbid, inflating prices.
63% of previous buyers reported experiencing at least one stressful hurdle during the process. However, this figure jumps to 80% for those who purchased a property within the last three years, indicating a worsening trend.
Delays are the most frequently cited source of stress. One-third of second-hand buyers experienced delays in conveyancing, the legal process of transferring property ownership, while over a quarter of new-build buyers faced hold-ups in moving into their homes. These delays not only cause frustration but can also lead to additional financial burdens for buyers, such as extended rental costs or storage fees.
Sellers are not immune to these issues, with conveyancing delays also identified as the most common stressful problem on their end. Other problems encountered by buyers included discovering issues with the property after the sale, sellers withdrawing from the agreement, and incurring unexpected additional costs. These issues collectively contribute to a sense of uncertainty and anxiety throughout the home-buying journey.
Implications for Policy and Market Reform
The ESRI’s research has significant implications for policymakers and stakeholders in the Irish property market. The findings suggest a need for greater regulation of bidding practices to mitigate the risk of overbidding and ensure a more level playing field for buyers. Increased transparency regarding estate agent practices, particularly concerning the continued marketing of properties after “sale agreed,” is also crucial.
the study highlights the importance of improving consumer education. Providing buyers and sellers with clear, accessible information about their rights and responsibilities could empower them to navigate the process with greater confidence and reduce the potential for stress and financial loss. This could involve public awareness campaigns, mandatory pre-purchase information sessions, or enhanced legal guidance.
The ESRI’s report serves as a timely reminder of the complexities and vulnerabilities inherent in the Irish housing market. Addressing these issues will require a concerted effort from policymakers, industry professionals, and consumer advocacy groups to create a more transparent, equitable, and efficient system for all.
