Buy-to-lets being sold are unlikely to be replaced in the rental market
Four in 10 house sales were due to landlords exiting the market in the final three months of 2022.
And property prices are expected to rise by 2pc this year, a considerable slowdown on the double-digit growth rates up to now, according to the Society of Chartered Surveyors Ireland’s annual property review.
The slower rate of property price inflation is likely to put a squeeze on house builders because construction cost rises are rising at more than 2pc.
Huge numbers of the properties being sold are buy-to-lets, according to a survey of estate agents who are members of the Society of Chartered Surveyors Ireland (SCSI).
Most of the estate agents expect that the buy-to-lets being sold will not be replaced in the rental market, putting more pressure on rental costs.
The survey found that popular new three-bed semis remain are so expensive they remain out of the reach for large number of first-time buyers on average salaries.
The SCSI said housing output would have to increase by 8pc a year if the Government’s Housing for All targets were to be hit by 2030.
Chair of the SCSI’s practice and policy committee John O’Sullivan said the marked drop-off in viewings activity in the last three months of last year, and the large proportion of rental properties coming on the market, illustrated some of the complex challenges facing the property market.
“The report shows a significant decline in viewings and sales in the fourth quarter of 2022 when compared with Q4 2021,” said Mr O’Sullivan.
He said 49pc of agents reported an increase in sales and viewing activity in the last three months of 2021, but this fell to just 15pc in the same quarter last year.
“Well-presented houses in good condition that are priced correctly are performing well when placed on the market for sale.
“Agents say homebuyers are showing a growing preference for completed ‘A-rated’ homes rather than properties that require renovations/modernisation or those with poorer Building Energy Rating (BER) while high-speed broadband is also a major plus.”
Mr O’Sullivan said the trend of second-hand buy-to-let properties coming on the market was evident throughout 2022, but it ramped up in the last quarter of the year.
“While this may have helped to increase the number of properties available for sale – 66pc of agents reported low stock levels this year as opposed to 85pc last year – the lack of supply remains the dominant issue in the market.”
The trend of private landlords exiting the market has serious implications for the supply of rental properties.
SCSI agents are reporting that the supply of available units to rent is at one of the lowest levels ever, and they do not believe the situation will improve in the short term.
“Almost eight out of 10 agents surveyed are of the view that individual buy-to-let second-hand rental units being sold at present will not be replaced in the rental market in the next two years,” Mr O’Sullivan said.
The survey found the three primary reasons for occupied residential units coming back on to the market for sale include the complex and restrictive nature of rent regulations, landlords finding compliance with rented housing standards too onerous, and net rental returns too low, according to the SCSI.
Separately, it emerged that sales returned to pre-pandemic levels last year despite signs of a slowdown in property price growth.
A record 60,000 homes were bought and sold in 2022, according to an analysis of the Property Price Register by Davy Stockbrokers.
The value of transactions last year was €23.6bn, up from €20.7bn, economist Conall Mac Coille calculated.
This is a rise of 6pc in transaction volumes from the previous year.
And in the last four months of last year, the number of home sales was up 4pc on the same quarter in 2021.
This was despite repeated interest rate hikes by the European Central Bank, the cost-of-living crisis, and sky-high inflation.
Mortgages approved in November were valued at almost €1.5bn, a rise of 2.5pc compared with the previous month, and up 17pc on the same month in 2021.
Chief executive of the Banking and Payments Federation Ireland Brian Hayes said much of the growth in mortgage approvals was driven by switching.