Property prices rise slightly in March but Covid impact expected

Property prices rise slightly in March but Covid impact expected
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Property prices rose in the year to March — though the outbreak of Covid-19 is likely to have an impact on pricing in subsequent months.

The latest Residential Property Price Index issued by the CSO shows a 1% rise in house prices in the year ending March, with prices now averaging €260,000.

The 10 most expensive areas in the country to buy are all in Dublin, with the most expensive areas outside Dublin all within commuting distance of the capital too.

Outside this region, Kinsale, Ballincollig, Carrigaline and the southside of Cork city are among the most expensive in the country, with buyers shelling out a mean price of €421,000 to live in Kinsale, and approximately €320,000 in each of the other areas.

Prices are now 17.9% lower than the peak of the market in 2007, and some 83.1% higher than the lowest point in 2013, with prices in Dublin now 92.9% higher than their low point.

Almost 3,600 homes were sold in March — a 12.6% increase on the same month last year, with new builds accounting for just 18.3% of the dwellings sold. First-time buyers represent about one-third of the market.

However, the full impact of the Covid-19 pandemic is likely to become clearer in the coming months.

The Property Price Register for the month of April shows a collapse in completed sales. Currently, there are 2,218 sales registered on the index — less than half the number sold in the same month last year. In April 2019, there were 4,542 properties sold.

The 2,218 currently listed would represent the slowest month since early 2014, though the register is still being updated and this figure may increase further as more returns are added.

Lender, KBC, anticipates prices falling in here by 12% this year as the economy grapples with the virus. That figure is described as a "base case" by the KBC Group, with the worst-case scenario anticipating a 20% drop.

The bank anticipates that prices will recover by 8% next year, with activity generally remaining weak.

These figures are disputed by Trevor Grant, chairman of the Association of Irish Mortgage Advisors, who said the expected "big drops" have not emerged:

Prior to Covid-19, there was a significant shortage of homes in Ireland. This has not changed and once people begin to return to work, this demand is likely to re-emerge.

Rachel McGovern of Brokers Ireland is less confident, though, and said the months ahead could tell a very different story due to the shutdown: "While underlying demand for homes is strong and should remain so, the level of unemployment and how long it will go on will determine a lot."

"We have already seen lenders pull back to a very cautious position on lending so it will be very difficult for many to secure mortgages. In addition, there is likely to be a significant decrease in completions arising from Covid-19, with Construction Information Services recently indicating the building of nearly 60,000 new homes on 796 sites had halted."

The report comes just days after property website, Daft.ie, issued its latest rental report, painting a bleak picture for the sector. Rents dropped by 2.1% from March to April — the biggest single-month drop since 2009.

Ronan Lyons, economist and author of the report, anticipates that the rental sector could be badly affected by the pandemic. Large numbers who rely on the rental sector, including lower-paid workers in areas such as hospitality and tourism, are among those feeling the brunt of the economic impact.

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