“Uplift in price inflation, as lockdown impedes supply of houses for sale” – Q1 Market Update
The current protracted period of lockdown has negatively impacted the stock of property available for sale throughout the country, thereby placing upward pressure on prices during the opening quarter of the year.
The average value of second-hand homes in Ireland increased by 1.5% in the opening three months of 2021. This compares to an increase of 0.1% in the first quarter of 2020. Furthermore, prices have increased by 2.5% in the twelve months to the end of quarter one.
Outside of Dublin, average values increased 2.2% in the three months to the end of March and increased 3.9% over the past twelve months.
According to Marian Finnegan, Managing Director, Sherry FitzGerald; “The national lockdown continues to weigh on the Irish housing market. The tightening of restrictions since the start of the year has temporarily limited the market’s ability to replenish supply. This has resulted in a rise in price inflation compared to the more subdued levels of growth observed last year. That said, it is anticipated that the supply of second-hand property will improve once restrictions are lifted, which should facilitate a stabilisation in the pace of growth as the year progresses.”
Transaction activity was very robust in the closing months of 2020, with almost 16,900 home sales recorded in the final quarter of last year. This was the strongest level of quarterly sales in over a decade. Overall, just under 46,200 home sales were recorded on the Property Price Register (PPR) in 2020, excluding multi-family/portfolio sales and new homes acquired for social housing.
Although, representing a 16% fall year-on-year, this decrease was not as large as once anticipated. Due to the time lag in adding properties to the PPR, quarter four data is the most accurate data available.
Dublin noted the largest reduction in transaction activity nationally compared to 2019, with approximately 13,500 dwellings transacting in the year, a fall of 22%. The regional centres of Cork, Limerick and Galway all noted similar levels of decline of approximately 16% year-on-year.
Activity levels in the new homes market suffered a greater decline than the second-hand market. Approximately 7,600 new home sales were recorded, a decrease of 20% year on year, with new home sales falling by 33% in Dublin. In contrast, there were approximately 38,600 sales, in the second-hand market, a reduction of 16% annually.
There are early indications that that COVID-19 may be causing a shift in buyer preference in terms of location. Nationally, 20% of vendors who sold their homes through Sherry FitzGerald in the opening quarter of 2021 stated their reason for selling was to relocate somewhere else in Ireland, up from 15% in the same period in 2020.
Owner occupiers continue to be the primary cohort of buyers, representing 79% of all purchasers in the first three months of this year, with first time buyers accounting for 54% of all owner occupiers. The volume of investors leaving the market continues to substantially outweigh those entering the market. Almost 29% of vendors were investors selling a property, whereas just 13% of investors purchasing a property.
In conclusion, Ms. Finnegan said, “There are many indications that the pandemic and associated lockdown is having a detrimental impact on supply in the residential market, resulting in upward pressure on prices. It should also be noted that while rental inflation has moderated, this is likely to be temporary as demand for accommodation will increase with the reopening of the economy in the months ahead. As such the decision to reopen the construction is welcome however we will not enjoy a stabilisation in prices in the second-hand market until supply is replenished with a reinstatement of viewing activity.