Ireland’s House Prices Continue to Rise

Property prices are expected to increase over the next twelve months as the ‘covid effect’ continues to take its toll on all sectors. As a result of the general shortage of housing available on the market, the average Irish property can now expect to see a conservative 6% rise in price in 2021.

 In their July property market report, the Society of Chartered Surveyors (SCSI) asked over two hundred estate agents for their take on the situation and their predictions for future pricing. The survey found that four out of five agents expected prices to rise in all regions, with the SCSI president TJ Cronin claiming “we had a supply crisis pre-covid and that has simply deepened due to Covid”.

 In the capital, prices are expected to increase by 4%; in Leinster by 6%, and in Munster, Ulster, and Connacht, the price increase could be as significant as 7%. Working from home throughout the pandemic has led many to be able to stash away some extra savings, with money that would have gone on commuting and other work-related provisions now put towards a new home. However, the increase in housing prices may mean these extra savings won’t go quite as far as they would have pre-pandemic. A property within Dublin worth €450,000 can expect a hike of at least €18,000. Outside of Dublin, in Munster, a 7% price increase will see a €250,000 home reaching €267,500 this year.

In addition to the impacts of the pandemic, which are still unfolding, property stock levels were already chronically low before covid-19 struck. With the industry experiencing months sof shutdown and 16 months of reduced activity, new homes output is still critically unable to keep up with demand. As construction firms work to regain momentum, the delivery of new properties remains hampered by a lack of material supply, a labour shortage, and alarming construction cost increases.

With a perfect storm of shortages, hikes in the cost of materials, and construction restrictions, the disruption to the housing market is expected to continue until at least 2023. Shirley Coulter, the CEO of the SCSI, believes extraordinary times require extraordinary measures to meet current and future housing demands: “We believe 400,000 new homes – social, affordable and private builds – will need to be built over the next ten years to meet pent-up demand and the needs of a growing population”.

Coulter goes on to endorse the Economic and Social Research Institute’s (ESRI) recommendation of doubling the investment into housing by increasing borrowing to between €4 and €7 billion per year. The ESRI believes this increase will allow upwards of 18,000 additional properties to be added to the stock of housing every year, which is still barely half of the required new homes annually.

 Despite the prices of materials and the difficulties in sourcing labour, construction activity did see an increase in June, the second month in a row, with the Ulster Bank Construction Manager’s Index (PMI) registering a score of 65, some 15 points above the ‘no-change’ mark of 50. The Ulster Bank’s chief economist, Simon Barry, claims the score is due to the “post-lockdown bounce” and is one of the highest levels ever surveyed by the PMI, just a little under May’s score of 66.4. This activity is expected to increase over the year as restrictions are further eased. However, according to Barry, there are still inflation problems, “supply-chain and cost challenges related to Brexit, Covid and global supply and shipping problems”.

As well as driving up prices, the demand for housing has resulted in 75% of all land sales being residentially zoned, with developers focussing their efforts on meeting the ever-growing public and private market need. According to Savills’ Director of Land Development, John Swarbrigg, this demand for zoned land has contributed to the rise in house prices, with development-ready sites now trading at a premium. Mr Swarbrigg believes government reform is necessary here, where development is being held back by 48% of all SHD permissions granted in the first six months of the year being subject to judicial review.