House prices to rise as apartment demand soars

House prices will continue to rise in the short term as demand outstrips supply, but more moderate price hikes are predicted for the years ahead, according to the latest report. A challenge for policy-makers will be to meet a huge need for urban apartments.

Report author Ronan Lyons, an economist at Trinity College Dublin (TCD), said three big-picture trends will define housing demand into the future and will lead to a huge need for urban apartments, not houses.

These include the growth in the population, especially over-50s; urbanisation; and falling household size.

“So, the challenge for the country is that almost all the net new housing need over the coming decades will be in the form of urban apartments,” said Mr Lyons. “But the vast majority of what is being built is not apartments.”

He said there was “nothing wrong with scheme houses, as an interim solution, while the policy system figures out how to fix apartment-building, as long as policy-makers know that this is what is happening”.

House prices rose 2.7% nationally in the second quarter of 2018, with the average price nationwide at €254,000, 5.6% higher than a year ago. Compared to their lowest point in 2013, prices nationwide have risen by an average of 54%, or €89,000.

However, in Donegal, prices are now lower than a year ago, the only part of the country where this is true. Prices in the county rose by just 5% in the two years after the Brexit referendum.

A survey of 1,000 property market participants by found an expectation that prices will continue to rise, but not as sharply as last year. The expected change, over the coming 12 months, is 5.3% nationally, down from 5.7% a year ago.

The fraction of respondents who believe that prices now represent good value fell to 24% nationwide in mid-2018.

In Dublin, just one in six respondents sees value in the market. The planned housing price-to- income ratio was 4.6 among respondents, and higher in Dublin, with the typical respondent planning to buy a house worth over five times annual income.

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