'Exceptional' growth in house prices signals 'a bumpy ride' for homebuyers

'Exceptional' growth in house prices signals 'a bumpy ride' for homebuyers

Property prices increased nationally by 12.4% in the year to September 2021. File picture: Denis Minihane

The sharp rise in property prices over the past year shows little sign of abating, with only very high earners likely to be able to afford to buy a home in some areas, an economist has warned.

Yesterday, the CSO published its latest Residential Property Price Index which showed that property prices have more than doubled across the country in the past eight years. It also showed that property prices had increased nationally by 12.4% in the year to September 2021.

In the space of just three months, prices rose 5.7%.

Describing the increase in Irish property prices as “exceptional”, KBC Bank chief economist Austin Hughes said it is not possible to predict if and when the growth in house prices will ease and the current situation has left many locked out of the possibility of buying a home.

“We have no real way of knowing how much of the excess savings are there still to be funnelled into demand [for housing],” he said. “I think part of it is a sense of ‘if I don’t get in now, I won’t have a chance in the next two-to-three years.” 

Mr Hughes said that, based on 2018 data, only the top 25% of earners would be in a position to buy a house in Dublin with a 90% mortgage.  The average price of a home purchased nationally in the 12 months to September was €317,447.

The most expensive prices were found in Dublin, with an average price of €489,573. The next highest was Wicklow, with an average selling price of €423,397.

In Cork City, this figure was €299,160 while the average selling price in the areas covered by Cork County Council was €282,257.

The cheapest houses sold were in more northerly, and border, counties. However, it was in border counties where prices increased the most, rising 21.9% in the space of a year. The least expensive county was Longford, with an average price of €136,378.

Pat Davitt, from the Institute of Professional Auctioneers and Valuers, said the double-digit growth evident across much of the country may now abate towards the end of this year.

He said: “We do see more properties are after coming on to the market, which has helped bring more stability.

“Some people are selling up who didn’t put it on the market earlier in the year. Properties are scarce enough but there’s still stock out there.” 

Mr Davitt said it would be essential to see supply ramped up in the coming years, given the persistently high demand in the market.

“We’ll see growth for the foreseeable [future], but not at the levels we’ve seen this year,” he said. 

Property prices aren’t going to drop any time soon.

Since they hit their trough nationally in early 2013, property prices have risen by 106.5% nationally, more than doubling. Dublin property prices are now 113.5% ahead of their low, while the rest of Ireland has prices that are now 108.2% higher than their trough.

By Eircode, the P17 area, which covers Kinsale, had the highest average house price in Cork of €404,149.

In T12, covering south Cork city, the average property sold for €341,416 while in the north of the city (T23), properties sold for an average of €277,684.

Average prices in P14-Crookstown were €377,431, P31-Ballincollig were €350,520 and T45- Glanmire were €324,698.

Across the country, the most expensive properties sold were found in D04, or Dublin 4, with an average price of €843,535. The five most expensive areas by Eircode were found in Dublin. At the other end of the spectrum, the least expensive area by Eircode was H23, or Clones, with an average price of €94,316.

Sinn Féin housing spokesman Eoin Ó Broin said the latest statistics make for “very depressing reading for anyone trying to buy a home”.

“After the last eight years, house prices have increased by over 100%,” he said. “This isn’t some consequence of Covid, or a temporal disruption. This is a longstanding structural feature of housing in this country.” He said that even if house price increases were to stabilise, the cost of buying a home would still be “unacceptably high”.

Housing Minister Darragh O'Brien, meanwhile, said he could not say if house prices have peaked. Mr O'Brien said the only way to bring down prices is to increase supply and that the figure for house completions next year is likely to be up.

"We're analysing the data but what will help is supply into next year and what I want to let people know is that the projections for next year in relation to housing delivery are very good," he said. 

"We're going to make up for quite a significant amount of lost ground. I think next year will be a significant year in terms of delivery."

Mr Hughes said that in lieu of having a large amount of savings or “the bank of mum and dad” available, the high prices being seen nationally would preclude many people from being able to afford to buy a home.

“There’s an element of panic buying,” he said. “Both postponed demand from the last few years and some demand brought forward where people think they have to get in now.

“There’s a bump in demand going through the system. When that bump eases and supply picks up, inflation comes down. But it’s still a diminishing number of people who’ll be able to afford ever-increasing prices.” Mr Hughes said there needed to be evidence of supply increasing dramatically as well as consistent, increased output in terms of housing delivery before there’ll be any wholesale changes.

He said: “It will take time for things to become normal. It will take consistency of policy, and it will take good luck as well. It’s not going to be today or tomorrow you see prices easing back… it’s going to be a bumpy ride.”

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