Friday 17 January 2020

Developers now fear 'flooding' market as house prices in decline

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Ellie Donnelly

Ellie Donnelly

House prices in Ireland have ended the decade in decline - which means developers are cautious about "flooding" the market with homes.

The average nationwide price of a house in the final three months of this year was just over €250,700, which is 1.2pc lower than a year ago, according to a report from Daft.ie.

It is the first calendar year that the website has recorded a fall since 2012.

In the second half of this year, prices remained roughly one-third lower than their peak in the Celtic Tiger heyday of 2007.

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Ronan Lyons, economist at Trinity College, and author of the Daft.ie report, said the fall in prices had been caused by an increase in the construction of three and four-bed owner-occupier homes now coming on the market, in particular in the Greater Dublin Area.

Over the next year-and-a-half property developers will try to get a better understanding of the market to ensure that it is not "flooded" with homes.

"If developers release too many homes at once, prices will go down. Over the next 12 to 18 months developers will be trying to figure out the market and not flood it," he said.

Mr Lyons added he expected house prices to follow a similar pattern next year to 2019, provided the UK leaves the European Union in an orderly fashion.

"Assuming a soft Brexit, supply versus demand will be the main factor impacting the price of houses," he said.

"Prices will be similar to this year, maybe falling slightly."

However, should there be a hard Brexit, it could lead to increased unemployment in Ireland, which would feed into the market here, further reducing the price of homes.

The latest data confirmed a report in last week's Irish Independent, which found that the price of an average house had fallen nationally over a year for the first time since the economic recovery.

Across the 54 markets in Ireland covered in the Daft report, prices are now falling year-on-year in twice as many as the numbers rising.

Of the 18 markets in which they are rising, none saw an increase greater than 5pc this year, with the biggest (4.4pc) seen in upmarket Dublin 4.

This is the first time since late 2012 that no area has recorded a year-on-year increase of 5pc or more.

In Leinster - excluding Dublin - the average price of a home fell in all 11 other counties between September and December of this year. In year-on-year terms, prices are lower in nine of the 11 counties when compared to the end of 2018.

The two counties in which average prices are higher in Leinster - excluding Dublin - are Westmeath and Meath.

In Dublin, prices fell by 1.2pc during the year. The greatest decline was reported in south Co Dublin, where the price of a home at the end of 2019 was 4pc lower.

In the other main cities in Ireland, prices were higher, with year-on-year increases of 0.8pc in Cork, 2.9pc in Limerick and 3.3pc in Waterford.

However, across Munster, having risen by 8.6pc in 2018, the cost of buying a home fell by an average of 0.8pc during the year.

Elsewhere, prices in Connacht and Ulster are now 2.6pc lower than 12 months ago.

Turning to the build-to-rent (BTR) market, Mr Lyons said increased numbers could help the rental market, which is undersupplied.

"It is the rental market - home to almost one-third of all households in the country - that is home to Ireland's housing issues as the country faces into the 2020s," he went on to add.

Rents are continuing to rise, but at a slower pace, according to Mr Lyons.

"We can expect this pattern to continue over the next 12 to 18 months," he added.

He said a "huge mismatch" existed between the current stock of housing, which is predominantly for households of three or more persons, and the country's housing needs, the majority of which, he said, was made up of just one or two people.

Irish Independent

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