Dublin's Euro-Era Compression
Ireland's property bubble followed the same script inside a currency union that removed the usual monetary safety valve. Euro-area interest rates, set for the whole currency bloc rather than for an overheating Irish economy specifically, sat far below what Irish inflation and credit growth warranted. Dublin rental yields fell well below the yield on Irish and German government bonds through the mid-2000s, and construction activity became so large a share of Irish GDP that the eventual bust — house prices fell by more than half from peak to trough — dragged the entire economy into a sovereign banking crisis and an IMF-EU bailout in 2010.
Why the Gap Matters More Than the Level
What unites these three episodes is not that yields were unusually low in absolute terms — real interest rates have varied enormously across eras — but that the yield gap between property income and the safe government alternative persisted and widened for years without correcting. In each case, market participants explained the gap not as mispricing but as a permanent feature of a supply-constrained, high-demand market. In each case, that explanation proved temporary once credit conditions tightened.