Property prices in Ireland set to rise by at least 8% in 2017
House prices in Ireland are set to continue growing in 2017 with growth of at least 8% forecast due to tight supply and the pace of economic recovery, a new survey report suggests.
The report from property portal MyHome warns that the combined impact of the Help the Buy scheme and looser lending rules means that double digit house price inflation is a distinct possibility.
The warning comes despite a subdued end to 2016 which saw the prices of newly listed properties on the MyHome website fall 2.2% quarter on quarter but this was in line with normal seasonal patterns. However prices nationally are up 5.5% year on year.
The report says that while asking prices on new instructions, which provide the best leading indicator for actual transaction prices, fell by over 2% in the fourth quarter of 2016, bringing the mix adjusted asking price for new sales nationally to €227,000, prices are still up 5.5% year on year.
In Dublin the mix adjusted asking prices for a newly listed property remained unchanged at €328,000, still up 4.9% year on year while the median asking price of newly listed properties excluding Dublin was up 10% year on year at €185,000.
In Cork prices were up 7.5% on the year to €215,000 while the increase in Cork City was even stronger at 9.5%, where the median is price now at €230,000. Prices in Limerick were up over 10% to €149,000, in Galway City they were up 8.6% to €220,000 and in Waterford they were up 6% to €159,000.
However, some locations saw prices fall, with two counties recording a decline in median asking prices. In Cavan they were down 4.69% and in Tipperary down 1.67%.
According to Conall MacCoille, chief economist at Davy, robust jobs growth and the lack of supply, especially in Dublin, are likely to deliver substantial house price gains while the Government’s Help to Buy scheme providing a tax rebate worth 5% of the purchase price of newly built homes to first time buyers will boost the market further.
‘In the short term, the measure is likely to push up house prices, helping builders’ profit margins. However there is likely to be little material impact on housing supply as land prices quickly rise,’ he said.
He also believes that more relaxed lending rules from the Central Bank of Ireland mean that there are no restrictions on the availability of 90% loan to value mortgages to first time buyers will also have an impact.
‘While the immediate impact of the change is likely to be small, limited to Dublin and commuter belt counties which account for the bulk of transactions above the €220,000 threshold, the main impact may be on expectations. As the housing market tightens, first time buyers desperate to secure homes will be encouraged to take out the maximum 90% LTV loans,’ he added.
According to MacCoille prices in the fourth quarter were in line with expectations. ‘In previous years activity was artificially inflated by expiring tax reliefs or fears of a credit crunch ahead of the introduction of new Central Bank lending rules. This year no such distortion exists,’ he pointed out.
However, listings fell to a new low in the fourth quarter, with new properties for sale on the website MyHome down 7.7% on last year. Angela Keegan, managing director, said that this means that just 1% of the Irish housing stock is currently listed for sale.
The lack of liquidity is particularly acute in Dublin where there are just 3,619 properties listed for sale. This is down 20% on last year and means just 0.7% of Dublin’s housing stock of 535,000 properties is currently listed for sale.
‘In this context buyers are becoming more desperate to secure properties. In fourth quarter the average time to sale agreed fell to a new low of four months across Ireland and to just three months in Dublin. The figures now suggest that the average house is sold just once every 50 years, whereas in the UK it’s half that,’ Keegan said.