Prices rocket as housing supply down to lowest level in decade
THE number of homes for sale at the start of the year was the lowest for a decade with supply having ‘depleted drastically’ over the course of the past 12 months, a housing market report has shown.
There were just 15,500 homes for sale in January compared to 53,000 on the market at the beginning of 2011.
Prices of second-hand houses have increased by 2.5% in the past year, the highest rate in two years, with most of that increase coming outside Dublin, where prices rose by 3.9%, says Sherry Fitzgerald.
According to Sherry Fitzgerald’s Irish Residential Market Review for Spring 2021, there has been ‘severe deterioration’ in housing stock for sale with the number of secondhand homes on the market in January at the lowest level in a decade ‘with supply having depleted drastically over the course of the last year’.
‘This situation deteriorated further after tighter [public health] restrictions were reimposed as potential vendors were discouraged from putting their homes up for sale. This temporality limited the market’s ability to replenish supply,’ said the report.
The price increase mirrors the official CSO figure which shows all property prices – new and second hand – increased by 2.6% in the year to January.
Speaking on the publication of the report, Sherry Fitzgerald managing director Marian Finnegan said the most notable trend at the start of the year was the reduction of housing units for sale.
‘In January of this year there were just 15,500 units advertised for sale in the secondary markets across the entire country. This is a reduction of 24% or about 5,000 houses and apartments on the same period last year, which is very significant,’ she said.
In January 2011, there were 53,000 units advertised for sale nationwide.
‘In Dublin, there were about 3,150 units advertised for sale in January of this year, which is about a 500 unit reduction on last year. Again, a very significant contraction in stock.’
According to Ms Finnegan, this reduction has since put ‘upward pressure on prices’.
‘Over the opening three months of this year we’ve seen average values in Ireland rise by about 1.5%, which is a very significant increase on last year. In the 12-month period, average values are up 2.5% in the country overall.
‘In Dublin, the level of price inflation, while still muted, hasn’t increased significantly. So average values in Dublin rose by about 1% in the opening quarter of this year versus a negative of 0.03% last year.
‘Outside of Dublin, average values have risen by 3.9% in the last 12 months. So, we are seeing that notable uptick in price inflation particularly outside of the capital.’
In Dublin alone supply was down 14% at the start of the year compared to 12 months ago. There were also drops in other cities such as Cork (21%), Galway (18%) and Limerick (13%).
‘Over the last ten years, only 113,130 new dwellings have been built in Ireland, representing just 40% of demand forecasts this period,’ the report continued.
Ms Finnegan said 20% of purchasers are now citing the reason for buying in the current market as relocation to a different part of the country. That figure stood at only 15% last year. ‘It could point to a change in buyer behaviour as a result of the pandemic, but it’s early days, we’ll watch that closely,’ she said.
The report also said that there has been an ‘enormous’ drop-off in the number of residential units commenced at the start of the year due to public health restrictions.
‘This will likely have a substantial knock-on effect on the total number of houses built, with current projections estimating that only 16,000 new homes will be built this year,’ added the report.
Ms Finnegan said the number of transactions in the final three months of last year was the ‘strongest quarterly transaction level’ in more than a decade, but the overall transactions last year is down 16% on 2019.
Prices up 3.9% outside of Dublin
Transactions down 16%