Saturday 23 March 2019

Study: House prices to jump 10pc this year - and 8pc in 2018

Stock Photo: John Cogill/Bloomberg News
Stock Photo: John Cogill/Bloomberg News

Charlie Weston Personal Finance Editor

THE average price of a house is set to jump by 10pc this year, and rise by another 8pc next year.

House completions are set to grow strongly, Goodbody Stockbrokers said in a new report on the economy.

But it will take a number of years before the number of units built matches demand, which is estimated at around 30,000 a year.

Goodbody said that greater-than-expected demand has led to it increase its forecast on house price growth.

“Mortgage approvals, even excluding cash purchases, are in excess of the amount of new supply expected to come to the market, thus house price inflation is expected to remain strong over the forecast period,” the report states.

It expects €13.5bn in new mortgage lending in the medium-term over the next few years.

Author of the report Dermot O’Leary added his voice to those questioning official house completion statistics for last year.

Official figures suggest there were 15,000 housing units finished last year.

But there were only 4,000 units transacted in 2016, according to stamp duty returns.

The finishing out of ghost estates and large numbers of self-builds, which are generally not available for sale, mean that there has been double-counting, Mr O’Leary’s report says.

“While supply remains low, demand appears to be running ahead of expectations,” the report states.

The number of people approved for a mortgage is way ahead of the housing available to buy. This is pushing up prices.

Mr O’Leary estimates that the average house price was €275,000 last year.

By the end of this year it is estimated to hit €300,000, and to go to €320,000 next year.

Demand for housing is being boosted by changes to the Central Bank mortgage lending rules for new buyers, the Government’s help-to-buy scheme, and growth in the population aided by inward migration.

“It is likely, therefore, that annual demand will be at the upper end of our previously estimated rate of 27,000 to 36,000 units per annum,” the Goodbody report states.

Housing building would be speeded up if higher densities were allowed for apartment blocks, and there was a relaxation of planning rules for apartments around issues such as car parking spaces and rules on the lift shafts per unit.

Mr O’Leary also recommends a vacant site levy and incentives for the build-to-rent sector.

The plight of first-time buyers is not helped by up to 58pc of purchases being made by cash buyers.

Mr O’Leary said this compares with around 35pc of the market in the UK.

He expects cash purchases to fall to around 40pc of the market in the medium term.

Fears that rapidly rising house prices are a threat to the economy prompted the European Commission to disclose this week that it is to closely examine the impact of property values on econ economic stability here.

Commissioner for Economic and Financial Affairs Pierre Moscovici has confirmed in a letter to Brian Hayes MEP that the Commission is closely monitoring property value movements here.

It is expected the EU Commission will closely examine the controversial help-to-buy scheme.

The Government’s help-to-buy scheme became operational in January.

It offers a tax rebate of up to €200,000 to first-time buyers who purchase a new home.

The International Monetary Fund (IMF) said this month that help-to-buy scheme for first-time buyers is pumping up demand in the property sector.

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