House price rises to slow over next year

Brexit and affordability are key factors, experts say

Annual increases are still high ‘Landlords exiting market’

HOUSE price rises face a sharp slowdown to just 2% over the next year, estate agents have said.

Experts say this is because of affordability and worries about the impact of Brexit on the economy.

As well as the slowdown in price rises, the rental market faces a future crisis as the number of landlords selling up has risen sharply.

The latest survey from the Society of Chartered Surveyors Ireland (SCSI) and the Central Bank found that for every investor buying, three are selling, meaning the number of properties for rent is falling sharply.

A 2% rise would add just €6,000 to the average Irish house price (about €300,000). In Dublin, house prices are forecast to rise 3%, which would see them go from an average of almost €443,000 to just over €456,000 –a hike of more than €13,000.

Slowing price rises will be seen as good for the market as it means more people can afford to buy. Stable price rises mean less chance of a property bubble followed by a crash.

The predicted rises are a sharp slowdown from just four years ago as the market rebounded from the crash and prices were rising by more than 20% a year.

Those strong price rises led the Central Bank to bring in its mortgage lending rules in 2015, which restricted how much people could borrow.

Despite the predicted slowdown, annual price rises are still high, at almost 9% a year, official figures from the Central Statistics Office show. While most property market experts expect house prices to continue to rise nationally – albeit at a much slower pace – the number who expect them to remain steady or fall over the next year has risen.

Almost six out of ten estate agents – 59% – now expect house prices to rise nationally in the coming year, down from 78% in the spring, according to the latest Society of Chartered Surveyors Ireland/Central Bank of Ireland Housing Market Survey.

In addition, the rate of inflation continues to slow dramatically. The agents surveyed expect national price inflation to be 2% for the coming year – down from 5% in the spring – and 5% over the next three years, down from 8%.

This is the third quarterly survey in a row in which the predicted rate of price inflation has slowed down. Despite the slowing, price expectations in Dublin have increased slightly from 2% to 3% for the next year, but have fallen to 5% over the next three years – down from 6%.

In Dublin, respondents viewed the construction of new units and the Central Bank’s mortgage rules as the joint primary factors for their views.

Estate agent and SCSI member John O’Sullivan said affordability was now impacting house price inflation, and as a result, the rate of inflation is moderating. He said this was welcome news for the market and the general economy.

Mr O’Sullivan said: ‘If prices are pushed beyond buyers’ ability to pay, it is inevitable prices will come back. The cost of accommodation, whether as a purchaser or tenant, is the single biggest challenge faced by those in areas of high demand.

‘The main reason the rate of inflation is slowing is due to an increase in supply which is down to new developments coming on stream and, as mentioned in the survey, the number of buy-tolets being offered to the market as landlords continue to exit the rental market.’

He also said the fact that only one investor is buying for every three selling is not good news for the rental market, especially in urban areas.