Soaring demand, constrained supply and double-digit price increases
It has been a busy week of residential property reporting across Ireland with the two main property portals releasing their latest figures, together with two of the country’s estate agency franchises: MyHome.ie, Daft.ie, Sherry FitzGerald, and the Real Estate Alliance network of estate agents. Both portals and both agencies are reporting record low levels of housing stock nationwide.
Asking prices across Ireland are up 12.3 percent, year-on-year, with the average price for a home now €295,000, and €385,000 in Dublin. Report author, Conall Mac Coille, chief economist at Davy described the “tightening” housing market conditions in the first quarter of the year as being broadly similar to last year. Supply remains impaired, however, a strong employment market means demand remains robust.
“One chink of light is that new instructions to sell of 7,500 in the first 11 weeks of 2022 are well up from 4,800 in 2021, albeit still below the 9,250 in 2019… Whatever new supply is emerging is being met by more than ample demand. Hence, transaction volumes in January and February were up 13 per cent on the year but pushed the market into ever tighter territory,” according to Mac Coille.
Key takeaway: Impaired supply and robust demand means that double-digit inflation is likely until the middle of the year, at least.
The average national asking price is slightly higher according to the Daft.ie figures, €299,093. This is an increase of 8.4 percent year-on-year, with increases smaller in urban areas, compared to rural.
“Inflation in housing prices remains stubbornly high – with Covid-19 disturbing an equilibrium of sorts that had emerged, with prices largely stable in 2019 but increasing since… As has been the case consistently over the last decade, increasing prices – initially in Dublin and then elsewhere – reflect a combination of strong demand and very weak supply.”
The Daft.ie report found that properties are currently exceeding asking prices by over 3.7 percent, whereas last year, the gap nationally had been just 0.4 percent.
Key takeaway: The last three quarters have seen “greater market heat – as measured by the premium paid by buyers above the listed price – than at any other time since the start of 2010”.
The latest quarterly figures from Ireland’s largest estate agency confirms that heightened levels of price growth are now prevalent across the State and are likely to continue for much of 2022. In addition to low levels of supply, pandemic-related factors, such as remote working and increased savings, are driving prices upwards. According to Sherry FitzGerald figures, headline inflation is running at 11.1 percent year-on-year, and at 9.6 percent in Dublin.
According to the company’s chief economist, Eoin Lynch, it is increasingly likely that the European Central Bank will begin to raise interest rates later this year, which will dampen demand.
“Additionally, new listings in the second-hand market are recovering towards their pre-pandemic levels and the heightened level of commencement activity over the past 12 months should help see some improvements in the level of supply currently available… All these factors have the potential to coalesce to reduce the current heightened rates of inflation”.
Key takeaway: “Moderating forces”, including an increase in supply and likely interest rate hikes, will begin to take effect as the year progresses, tapering house price inflation.
Unlike the portals, the Irish Independent-REA Average House Price Survey is based on the achieved sale price of a three-bed semi-detached house. The headline reports from this survey reads that house prices are increasing by almost €100 a day as the market shows no signs of slowing down. The REA figures found average house prices rose by 3.16 percent in the first three months of the year, which equates to an average of €9,000. Almost 60 percent of all purchasers nationwide were first-time buyers, a figure which rose to 76 percent in Dublin. This data recorded the highest rate of year-on-year inflation at 14 percent. Achieved sales prices remain highest in Dublin, with an average of €481,250.
According to REA spokesperson, Barry McDonald:
“The country’s other major cities saw rises of 2.2 percent on average, mostly in line with Dublin, while Waterford city returned a 6 percent price increase with the average three-bed semi up €15,000 to €265,000, driven by high demand from outside buyers…. Counties in Dublin’s commuter belt saw prices increase 4.47 percent, or an average €13,000 to €305,000. This was double the rate of increase seen in the capital.”
Key takeaway: The REA survey found a notable return of younger generations to rural Ireland, bringing with them increased purchasing power. One in every three buyers were from outside the county as new flexible working options prompted quality of life decisions, no doubt driven by affordability issues.
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