Wednesday 15 August 2018

New supply of homes set to take heat out of the property market

Stock Image: Bloomberg
Stock Image: Bloomberg

A NEW supply of homes on the market for the first time in the decade will result in a less-heated property market in 2018, estate agents have predicted.

The news will come as welcome relief for first-time buyers.

A survey carried out for the Irish Independent by the Real Estate Alliance Group (REA) has found that agents throughout the country expect prices to rise by 7.5pc on average in the next 12 months.

However, many new developments are concentrated on the east coast, with Dublin agents predicting that prices in the capital will rise by a slightly higher 8.2pc in 2018.

This would be a marked change from 2017, which saw average property prices increase by 11.3pc nationally and 13pc in Dublin city and county before slowing down across the country in quarter four.

Agents in two of the three main cities outside Dublin are optimistic about 2018, with somewhat lesser hikes of 8pc predicted in Limerick (8.5pc in 2017) and 7pc in Galway, which experienced 9.6pc growth in 2017.

Galway agency REA McGreal Burke is expecting a lot of new developments to dominate the market at the back end of the year, easing the poor supply level in the city.

However, Cork is looking at a more modest 5pc increase, on a par with that achieved in 2017. REA O’Donoghue Clarke reports that the Leeside city is also suffering from a lack of second-hand supply, fuelled by the effects of the Central Bank’s €220,000 deposit limit in a city where average house prices are €310,000.

The outlook for the commuter areas surrounding the capital is continuing to improve after 2017 which saw prices rise by 10pc.

Counties around Dublin are predicting a rise of 7.2pc on average after two years which saw Kildare and Wicklow lag behind national rates of increase on 7pc, but Meath outstrips the country on 14pc due to the lower average house cost relevant to the Central Bank limit.

An increase in mortgage-approved buyers and the ‘Help to Buy’ scheme saw first-time buyers return to viewings in force over the past 12 months.

However, a shortage of suitable supply caused prices to appreciate, and REA agents in the capital are now hopeful that new homes will drive a brighter outlook for the new year, freeing up some supply of second hand stock in the market and easing inflation in relevant locations.

The Luas has proved to be a huge driver of interest with the cross-city line and extension to Broombridge opening up a new range of commuting and living options.

“Our members anticipate that there will be an increase in new homes supply to the market in 2018, which will have a positive effect on a market that is under-supplied at the moment,” REA spokesperson Healy Hynes said.

“As an example of supply driving inflation, Kilkenny was Ireland’s highest rising county in 2017, with an increase of 23.3pc in the price of the average semi-detached house. The increase was even higher in Kilkenny city where REA Boyd reported a 27pc upturn in 2017, and is predicting a further 15pc rise in 2018 – completely due to lack of supply.”

Figures from the Property Services Regulatory Authority show that less property transactions took place in 2017 (47,000 units to date) than 2016 (49,720 units).

“That is 40pc below what it should be in a normal market, which should see 80,000 properties changing hands,” Mr Hynes said.

“While the ‘Help to Buy’ scheme has had a positive effect, we would like to see the banks taking a more pragmatic view of people’s long-term rental payments in terms of mortgage applications. The provision of social housing by county councils is one of the major keys to increasing supply and relieving pressure on rental markets.

“The lack of local authority house building is driving an ever-upward spiral in rental demand, which in turn is locking people into a cycle where they cannot save.”

The return of investors to the market has been reported in Dublin, particularly on the southside where REA Ed Dempsey in Clonskeagh is predicting a 10pc rise in 2018.

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