The Republic’s homebuying process is stoking bidding wars and pushing property prices higher, a new study has found.
To assess how bidder behaviour changed under different auction processes, the Economic and Social Research Institute (ESRI) conducted a controlled auction experiment involving some 800 participants.
It found participants’ bids were pushed higher in open auctions managed by estate agents or online platforms than in sealed bid auctions.
“Participants in open auctions were more likely both to exceed their original budget and to bid higher than their view of what the property was worth,” said the think tank.
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Most homes countrywide are sold by way of private treaty auctions – what the report calls “open offer” frameworks – with an estate agent co-ordinating valuations, advertising, viewings and managing bids.
Under this process, sellers are free to consider multiple offers, and the auction can involve multiple rounds of bidding with the highest offer being selected.
Buyers are typically informed by the estate agent if someone has put in a larger bid than them and are asked if they wish to top that.
“Auction fever and loss aversion” can drive individuals to outbid each other and exceed “their pre-stated ideal budgets”, said the ESRI.
It noted that behavioural dynamics such as competitive pressure and poor information can lead to disadvantageous outcomes for buyers and sellers.
A recent report by property website MyHome, which is owned by The Irish Times, found that 40 per cent of properties sold in the Republic in 2024 were settled at 10 per cent or more above the original asking price. One in seven transactions was settled at 20 per cent above the asking price.
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The ESRI study was funded by the Competition and Consumer Protection Commission. The institute also surveyed buyer and seller experiences and expectations. It found “significant gaps in people’s knowledge of rights and responsibilities” and a low level of “trust and transparency” in the homebuying process here.
While more than two-thirds know it is illegal for a seller to accept multiple deposits for the same property, only one in five know that agents can legally continue to market a property after it goes “sale agreed”.
Additionally, most people did not know that a buyer can pull out of a sale without penalty before contracts are signed.
The survey also found that almost two-thirds (63 per cent) of people who previously bought a property in the Republic experienced at least one “transactional stressor” during the process, rising to 84 per cent among those who bought in the last three years.
The most common issues were delays, with one-third of second-hand home buyers experiencing a delay in conveyancing and more than a quarter of new-build buyers experiencing “a delay moving in”.
Other problems experienced included sellers pulling out and buyers having to spend more than expected on additional costs. Conveyancing delays were the most commonly cited “stressful problem for sellers”.
When asked which elements of the system they would prefer, participants leaned towards online bidding platforms, seller-led surveys and legally binding upon contract signing.
“The findings show that people are navigating a system they may not fully understand and increasingly experiencing stress, especially delays to conveyancing,” said the ESRI’s Deirdre Robertson. “Our findings also suggest that the most commonly used bidding systems encourage people to overbid, inflating prices.”
