No plunge in prices yet, as some pent-up demand keeps market going

THERE was something of a rush to predict a tumbling property market in the wake of Covid-19’s arrival in Ireland through March and into April.

Some were predicting the cheapest property prices in 10 years. The fact that prices have remained largely unaffected over the three months of Covid shows that perhaps in future we should consider exactly who it is that’s crying wolf, not least a sector such as stockbroking that competes directly with property investment for its bread and butter in the bigger picture.

It’s also not fair on those hoping for lower prices going forward, so they can get on the property ladder and out of overpriced rental. While cheaper property prices are a good thing for first time buyers and generally for housing, hopes shouldn’t be raised just yet of cheaper homes, as proved by the data contained in this quarter’s

Irish Independent/REA Average House Price Index.

This data measures the experiences of agents around Ireland in the immediate situation – and is not based on asking prices (which are largely irrelevant to values) or out-of-date data that reflects the picture four or six months ago.

For those who doubt the data, consider that an agent who raises a vendor’s price hopes unrealistically can’t sell the property, and doesn’t get a fee.

There is no disguising, however, that vendors sat on their hands through the Covid wave.

In fact, pent-up demand from a postponement of sales activity, along with the turning off of the new homes tap (which had been supplying 20pc of purchases recently), created supply squeezes that generally produce the opposite effect to falling prices.

In the months ahead, the market will be busy, as pent-up demand is expended. In some areas, we might even expect slight price rises as a result. But it’s likely prices will continue plodding on

The type of person who can buy has changed

It might be a good time to look to rent

until autumn, fairly statically as it was before Covid, with some localised price slides on second-hand estates thanks to new-home launches in their proximity.

A factor that wasn’t generally figured into those early crash calls is the notion that the type of person can buy a home in Ireland has been whittled right down in recent years and thus far, these people have generally not been impacted badly economically.

Some, such as in those working in social media and tech, may find their lot actually improved. And in the greater economy, while créches closed, paint suppliers did well; as publicans shut their doors, online sales outfits were booming. Some people have done very well thanks to lockdown.

Sadly, thanks to years of increasing prices (due to shortages), diminishing purchasing powers (Central Bank regulations) and the relative sluggish rise of wages over the last decade, only couples earning an aboveaverage salary have been able to buy a three-bed semi within 50km of the capital for a numbers of years. The same is true to a lesser extent in Cork and Galway cities.

It means that the immediate job losses caused by Covid (largely in the less well-paid sectors) have not in reality affected demand for buying homes thus far.

As in every country in the world, it is the wealthier who have emerged most unscathed, despite Covid supposedly being a ‘democratic’ virus that can be caught by everyone.

Covid may in fact have freed up more rental accommodation for those who cannot afford to buy, not least because the outbreak caused many international lockdown-conscious foreign workers home to return to their home countries to be with their families. Most have not yet returned. So it might actually be a good time to look, if you’re considering renting.

Finally, the Central Bank’s lending regulations continue to dominate the market. Agents attributed these as the biggest factor to insulate the Irish property market against Covid thus far. Whereas in the past it was too easy to get a loan for a property, now there’s so many hoops to jump through that only rocksolid cases can buy.

Where Covid could have an impact on property prices here is in the event of a much larger economic slump that affects all. A second wave of the virus and another large-scale lockdown could certainly bring this on.

As with the last crash, lower prices won’t benefit buyers unless they’re rich, because by then, most of us won’t be able to afford them either.

But for now property prices have not budged.

We are still living in a country with an affordable home shortage, in which too many people can’t buy.