While property prices recorded double digit growth in 2021 – and are expected to continue to rise in 2022 – the median rate of increase nationally is expected to moderate to 5% this year according to the Society of Chartered Surveyors Ireland.
According to the findings, 9 out of 10 agents (89%) expect property prices to increase over the coming 12 months, 9% expect prices to remain the same while just 2% expect a decrease. Last year the respective figures were 68%, 24% and 8%.
SCSI estate agents believe property prices in Tipperary, the rest of Munster and Leinster are set for a median increase of 5% while Connacht Ulster will see an increase of 7%.
The vast majority (80%) of agents who expect prices to rise believe it is due to market factors ie the lack of supply of new and existing homes, 13% attribute it to economic factors while just 4% believe the Central Bank of Ireland’s macro prudential rules are the key driver.
This year’s SCSI annual Residential and Outlook report – which has been running since 1983 – is based on three surveys of 580 members conducted over the last 12 months.
The President of the SCSI, Cork based estate agent, TJ Cronin said 2021 was the year when the lack of supply and Covid combined to totally distort the property market, pushing up demand and inhibiting the supply of new homes.
While those issues will continue to dominate the market in 2022, Mr Cronin, said the double-digit inflation we experienced last year was not sustainable and SCSI members believed the rate would moderate.
“Our survey shows the key factor affecting property prices all over the country is the low level of new housing supply. In Q4 2021 85% of agents reported having low levels of stock available for sale. In three surveys that figure has not dropped below 81%.”
“When you combine that lack of supply with the two other key issues identified by our members as affecting property prices – namely pent-up demand due to Covid and buyers having an enhanced level of savings due to the pandemic – it’s clear prices are only going to go one way.”
“Following lockdown 3, we can see now that the market experienced something of a frenzy from April to July with competitive bidding and high sales prices pushing the annual rate of inflation up to 14%. While this was good news for vendors, many well-funded buyers found themselves priced out of the market.”
“Although the market slowed in Q4 our members are predicting a 3% increase in prices in the first quarter as new buyers come into the market. They believe the rate of inflation will then moderate to a median of 5% nationally for the year. However, in Connacht/Ulster where prices are comparatively lower, agents are predicting a 7% rise in prices.”
According to the CSO the median price of a home nationally is €275,000. A 5% increase in this instance would translate to an increase of €13,750 while a 7% increase would equate to an increase of €19,250. The median price of a home in Dublin is €400,000, so a 5% increase here means an increase of €20,000.
New planning system must address costly delays
With residential property completions only due to hit the 30,000 mark in 2023 – the SCSI estimates the country needs to be building 40,000 units per annum to meet demand – Cronin said driving down the costs of new, well designed sustainable homes would be critical to the success of the Government’s Housing for All plan.
Cronin pointed out that previous research carried out by the SCSI found that a delay of a year to an average apartment development caused by judicial reviews (JRs) can add at least €8,000 to €12,000 to the cost of each new unit.
“While the expected moderation in the rate of price increases for this year is welcome, the increases will heap further pressure on hard pressed buyers seeking affordable homes. At a time when material costs are rising sharply it is particularly important that we do everything possible to lower the costs of new home construction by removing planning delays and addressing the procurement and infrastructure issues which are slowing the construction of critical housing projects.”
“That is why it is so important that the Government achieves the correct balance between different stakeholders when it introduces the Large-Scale Residential Developments system which replaces the Strategic Housing Development process. While the new system will restore planning decision powers to local authorities it must also establish mechanisms which facilitate the resolution of appeals in a more efficient and cost-effective manner.”
The Rental Market
Some 79% of agents surveyed believe that rental prices will increase over the next 12 months, while a further 17% expect prices to remain the same; only 3% anticipate a decrease in rental prices.
Of the agents who expect to see prices increase, 74% expect they will rise by between 0-5%, 24% expect them to increase by 5-10% while 2% expect them to rise by 11-15%.
According to the RTB the national standardised average rent in Q3 2021 was €1,400.
TJ Cronin said a chronic lack of supply, similar to the sales market, was also the critical factor affecting the rental market, with the continued departure of small and medium sized landlords a worrying trend.
“Fifty per-cent of agents anticipate an increase in buy-to-let properties being placed on the sales market by the end of Q4, while a further 31% expected numbers to remain similar to the previous quarter. The top three reason cited by agents for the departure are; highly complex and restrictive rental legislation, landlords coming out of negative equity and net rental returns being too low.”
Agents surveyed said that due to Covid and the increase in people working from home, the demand for larger properties in rural locations with good broadband remains strong. There was also anecdotal evidence that demand is growing for one-off properties, especially those located in coastal locations. Some agents said prices for such properties increased by up to 20% last year.
The rising price of building materials and labour has had an impact on those seeking to renovate homes. Agents say that while demand in the second-hand market remains brisk, some prices on derelict properties or those requiring substantial investment have not risen as much as expected due to the sharp rise in construction inflation.
According to the report, covid has led to an increase in the use of technology by agents in the viewing and sale of property, which increases transparency and makes for more efficient transactions. Some 73% of agents have made significant investment or are considering such investment in digital technologies to aid the property sales process.