Income rises to make homes more affordable
First-time buyers have been told they can expect the cost of buying a home to become more affordable over the next 18 months as wage increases continue to rise faster than property prices.
Property experts now predict that increased supply will come on stream this year and in 2020, while price growth remains steady.
Please log in or register with Independent.ie for free access to this article.
Added to this, John McCartney, director of research at Savills, said predicted national wage growth of 4.1pc over the next 18 months will make buying a home more affordable for those who are currently renting. Recent CSO data shows year-on-year house price growth slowed to 1.9pc in January compared to 11.7pc in the same month last year.
"If that is sustained for a continued period, and I think it will be because wage inflation is only going to rise, as we continue to create more jobs," Mr McCartney told the Sunday Independent.
"We are down to 5.4pc unemployment and as that pushes lower you get a more competitive employment market which creates more competitive bidding for talent and an increase in wages.
"I think wage inflation is going to pick up and house price inflation over the next 12 or 18 months somewhere around 2pc and 5pc.
"I think we are going in to a situation where home ownership will increasingly become affordable for people who have previously been renting and would prefer to be homeowners."
Mr McCartney said he expects housing supply to remain steady throughout 2019 but remain short of the 30,000 to 35,000 units needed annually to address the housing crisis. More than 18,000 housing units were built last year, a 25pc increase, and experts expect this figure to rise further in 2019.
CSO data for January shows house prices grew 1.9pc compared to the same period last year. Further analysis by property website Daft.ie showed house prices in the capital rose by an average of 4.1pc in the first three months of 2019 compared to the same period last year.
However, the rate of growth has slowed. Some markets in Dublin showed zero growth in the first quarter of this year while Dublin 2 and Dublin 4 saw prices drop by 1pc compared to the previous year.
Other markets around the country have also showed signs of cooling.
Meanwhile, further CSO data shows significant wage growth, helping to make buying a home more affordable. Average weakly earnings had increased to €761.65 per week in the final quarter of last year, a 4.1pc increase over 12 months and the largest year-on-year change since the economic downturn.
"The residential market, supply is catching up with demand and as that happens I think we are in for a period of more modest house price index and rental growth," Mr McCartney said.
Goodbody chief economist Dermot O'Leary said house price growth and wage growth should make the housing market more sustainable.
"I would think a 5pc growth rate for house prices is likely this year and that would be a sustainable growth rate because that would be in line with income growth," Mr O'Leary said.
"It is very welcome and is exactly what the mortgage rules are designed to do."