Increased supply to hit house price growth

The emergence of new homes as a real option for buyers, for the first time in a decade, is set to modify growth in the cost of second-hand properties, estate agents have predicted.

Increased supply to hit house price growth

A survey carried out by the Real Estate Alliance (REA) group has found its agents expect prices to rise by 7.5% on average in the next 12 months, 4% less than the increase in 2017.

Many new developments are coming to fruition, most of them concentrated on the east coast but substantial numbers are also close to completion in Galway.

Throughout 2017, prices rose by 11.3% nationally and 13% in Dublin city and county.

Most of the increases took place in the early part of the year with price growth slowing in the last quarter of the year.

Agents in two of the three main cities outside Dublin are optimistic about 2018, with rises of 8% predicted in Limerick, which saw 8.5% growth last year, and 7% in Galway, which experienced 9.6% growth in 2017.

Galway agents REA McGreal Burke are expecting a lot of new developments which are almost at construction stage to dominate the market in the back end of the year, easing the poor supply level in the city.

However, Cork is looking at a more modest 5% increase, on a par with that achieved in 2017.

REA O’Donoghue Clarke report that Cork is 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 price of the average three-bed semi in County Cork rose by 12% to €151,250 in the last 12 months, with local agents predicting prices will rise by 7.5% in the county in the coming year.

The outlook for the commuter areas around is continuing to improve after a cautious 2017, which saw prices rise by 10%.

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. REA agents in Dublin are predicting that the purchase of more new homes will free up the supply of second-hand stock in the market.

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

“As an example of supply driving inflation, Kilkenny was Ireland’s highest rising county in 2017, with an increase of 23.3% in the price of the average semi-detached house.

“The increase was even higher in Kilkenny city where REA Boyd reported a 27% upturn in 2017 and is predicting a further 15% rise in 2018 — completely due to lack of supply.

“In areas such as Laois, prices are still 10-15% below breakeven for new developments, and low supply led to 18% rises in 2017, while some counties are predicting that it could be five years before they see new developments.

“Figures from the Property Services Regulatory Authority show that 2017 [47,000 units to date] is just about on a par with 2016 [49,720] in terms of property transactions.

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

Mr Hynes said that, while the help-to-buy scheme had a positive effect, banks should take a more prag matic view of people’s long-term rental payments in terms of mortgage applications.

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