Residential Property Market Q1 2019

April 2, 2019
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“Moderate house price inflation in opening months of 2019”

Statement by Marian Finnegan, Chief Economist, Sherry FitzGerald Group

Tuesday April 2nd, 2019

 

Sherry FitzGerald, Ireland’s largest estate agents, announced today (Tuesday) that the average value of Irish established homes rose by 0.2% during the opening three months of 2019. This compares to growth of 2.1% recorded in Q1 2018.  Prices have increased 1.9% annually to Q1 2019.

 

Price growth remained flat in Dublin in Q1 2019, notably lower than the 2.3% recorded in the same period last year. When Dublin is excluded from the national figure, the increase is 0.7%, compared to growth of 1.7% recorded in Q1 2018.

 

In the regional centres outside of Dublin, Limerick recorded the highest increase of 1.3% during the quarter, while prices in both Cork and Galway increased by 0.3%.

 

According to Marian Finnegan, Chief Economist, Sherry FitzGerald; “Data from the opening months of 2019 reveals a continued moderation in price growth, a trend which first emerged during the latter half of 2018.  The ongoing impact of a tighter mortgage market, due to the tightening of the lending policy introduced towards the end of 2017, and to a lesser extent an improved offering in the new homes market have collectively resulted in the slowdown in the pace of inflation.  This trend of moderate price growth is likely to remain a feature of the market for the year ahead.”

 

The Property Price Register reveals that the total value of residential property which transacted in 2018 equalled €16.7 billion. Due to the time lag in logging data to the Property Price Register, 2018 data is the most accurate data available. If one excludes multi-family/portfolio sales, there was approximately 53,900 sales nationally in 2018, of which 17,500 were in Dublin. On an annual basis, the volume of sales grew by 6% nationally and 5% in Dublin.

 

It is particularly notable that the volume of new dwelling sales recorded on the Property Price Register increased by 16% nationally during 2018, with a 20% increase in Dublin.  It is worth noting that 89% of all new properties which sold in 2018 were for less than €500,000 in value.  This notable uplift in the sale of new homes in this price category points to the success of the ‘Help to Buy’ scheme in delivering much needed starter homes into the market.

 

Comparatively, second hand sales grew 4% year-on-year and notably growth of only 1% in second-hand sales in Dublin in the same period.

 

 

 

Comparing the Property Price Register data to mortgage drawdown data from the Banking and Payments Federation Ireland during 2018 indicates that 40% of single property transactions did not have a mortgage attached to the transaction. The comparable figure in 2017 was 42%.

 

Owner occupier levels remained strong in the opening quarter of the year, accounting for 77% of all purchasers, up on the same period in 2018.  Notably first-time buyers accounted for 50% of all owner occupiers.

 

Finally, an analysis of vendor and purchaser profiles during 2018, reveals a continued outflow of investors from the buy to let market. Reflecting the trends of recent years, 33% of vendors were selling their investment properties, while investors entering the market represented only 16% of purchasers.  This trend continues to deepen the supply side crisis in the lettings market, which is already incredibly challenging.  The volume of investors in the new homes sector is negligible, outside of the multi-family sector.

 

In conclusion, Ms. Finnegan said; “A review of the residential market in the opening months of 2019 reveals a continuation of many of the trends evident in 2018.   While some progress has been made to addressing the supply side shortages, the gap between demand and supply remains very challenging. 

 

This is particularly evident in the rental market with current rents in Ireland 15% above their previous peak, and yet there is still a strong outflow of investors from the market.

 

It is now abundantly clear that private landlords require a more equitable tax treatment, particularly given the very favourable tax structure offered to other investment vehicles such as REITs etc.  As such, steps to address the loss of properties from the rental sector are required immediately. 

 

However, they will be only part of the solution.  While much has been achieved to date, we are still too far away from equilibrium in the market.  It is particularly important that the ‘Help to Buy’ scheme, which has positively enhanced the delivery of starter homes in the greater Dublin area is maintained.  This is essential to underwrite the delivery of affordable homes across the country overall.

 

All in all, we need to be prepared to take bold positive steps to increase supply of all types of properties.”