Property prices remain strong as shortage of supply and rentals grows

Estate agency group, Sherry FitzGerald, reports today that despite the challenges COVID-19 is placing on the wider economy, property prices have remained robust with a moderate increase in prices in the second-hand market nationwide.

The average value of second-hand homes in Ireland increased by 0.5 per cent in the third quarter of 2020, representing the highest level of quarterly growth in two years. Prices have now risen 0.6 per cent over the first nine months of the year.

In Dublin, prices increased 0.2 per cent in the quarter and by the same figure in the year to date. This compares to a decrease of 0.5 per cent over the opening nine months of 2019.

Outside of the capital, price growth was more elevated. Average national prices, excluding Dublin, rose by one per cent in the third quarter and 1.3 per cent since the start of the year. Price growth was particularly strong in the West region in quarter three, increasing 2.5 per cent. All regions across the country recorded a rise in prices in the quarter.

Marian Finnegan, managing director, Sherry FitzGerald, says: “Despite the unprecedented shock of the pandemic on the economy to date, residential property prices have demonstrated a remarkable degree of resilience. Residential property prices have begun to increase again, rising in both this quarter and in the year to date. Furthermore, potential homebuyers’ commitment to purchase has remained buoyant despite current uncertainty levels."

She added: "It is worth noting that the short-term outlook for supply is not encouraging with reduced levels of completions and commencements over much of the spring and summer.”

Supply shortages have been an enduring feature of the market in recent years. This has been exacerbated further by the onset of COVID-19 and the national restrictions which ensued. While there was some uptake in supply levels in the summer, they remain below last year's levels and severely short of what is required.

According to the Property Price Register (PPR) , some 18,700 homes sold nationally in the first half of the year. This figure, which excludes block sales and new homes acquired for social housing, represented a 22 per cent drop year-on-year Dublin saw a greater reduction of 28 per cent with only 5,500 homes sold in the period. Due to the lag in recording transactions to the PPR, data for quarter two is the most accurate available.

When this figure is broken down it shows that new home sales in the first half of the year decreased 26 per cent compared to 2019, while second-hand sales declined by 21 per cent.

The make up of buyers has remained broadly consistent in the year with owner occupiers remaining the most prevalent. This cohort accounted for 80 per cent of all purchasers who bought through Sherry FitzGerald in the first nine months of the year, with first-time buyers accounting for 54 per cent of all owner occupiers.

The withdrawal of investors from the market has also remained consistent accounting for just 12 per cent of purchasers with Sherry FitzGerald, while 32 per cent of vendors were selling investment properties.

This prolonged mismatch between investors entering and exiting the market is reflected in the Residential Tenancy Board’s (RTB) registration data. The data reveals that between Q2 2019 and Q2 2020, the volume of private rented tenancies has fallen by over 11,000 and the number of private landlords in the market by over 5,500.

In conclusion, Ms Finnegan said: “Since the initial lockdown of the country in March, COVID-19 has brought an unprecedented shock to the economy and to the country at large. Yet, despite the economic shock, the housing market is proving to be resilient with both prices and buyer sentiment remaining firm. Prices have in fact increased in the year to date reflecting the underlying strength of demand for housing.

"Unfortunately, however, the housing crisis has only worsened. The fallout from COVID-19 will only exacerbate the pre-existing failings that have been evident for the past few years. The combination of reduced construction activity, a loss of second-hand stock coming to the market and the continued exodus of investors from the residential lettings market all serve to further damage market stock levels. As such, it is of even greater importance that the Government address the lack of supply in the market by facilitating greater construction activity through improved viability and affordability measures.”