Housing market is ‘heating up again’, says BoI economist

PROPERTY asking prices are likely to boom again, rising at their fastest rate for 18 months, a new report has revealed.

As inflation drops close to the official 2% target, the European Central Bank (ECB) is likely to bring interest rates down, stoking demand as mortgage rates fall.

The highest rate of transactional activity among home-buyers since the recession has led to the fastest pace of asking-price inflation growth in 18 months, according to a report from MyHome.ie in association with Bank of Ireland.

It found that annual asking price inflation was 6.5% nationwide. The last time this figure was higher was during July to September 2022, when it was 7.7%. Annual asking price inflation in Dublin has now accelerated to 7.2%, outpacing the 5.5% figure in the rest of the State.

The report found asking prices rose by 2% on the quarter nationally, by 2.3% in Dublin and by 1.7% outside the capital. This means the average asking price for ‘new Demand: Conall Mac Coille instructions’ nationally in the last three months of 2023 was €340,000, an increase of €20,000 on a year earlier.

In Dublin it was €425,000, and elsewhere around the country it was €285,000. The term ‘new instructions’ refers to a property which an agent has just been asked to sell or let, but which may have been on the market through a rival agent who failed to find a buyer or tenant.

Bank of Ireland chief economist Conall Mac Coille said the latest report indicates the housing market is ‘heating up again’. He added: ‘We can see demand is intense from transactional activity.

The number of home-buyers (first-time buyers and movers) rose to 44,100 in 2023, up 1.4% on 2022 and accounting for 71% of total transactions. This is the highest proportion of transactions accounted for by home-buyers since 2013.

‘In contrast, household buyto-let purchases fell by 9% in 2023, no doubt hurt by higher interest rates.’

The data shows strong demand from the State for social and affordable housing is being offset by the decline in purchases from institutional investors into the private rented sector. In early 2024, houses were being sold for 4.6% over the original asking price – a stark difference to the figure one year ago, which was 1%.

Just 0.9% of homes listed for sale on MyHome.ie cut their asking price to secure a sale in the first three months of this year, a record low and ‘indicative of the tight housing market’, the report states. The average first-time-buyer in the first half of 2023 had an average income of €88,258, up 6.7% from €82,641 in the first six months of 2022. This saw the average mortgage approval for house purchases rise above €300,000 for the first time, at the end of 2023, up 6.4% over the year.

The number of properties listed for sale on MyHome.ie has also hit a record low, of 10,935, slightly below the number during Covid-19.

However, home-building activity continues to pick up. There were 7,056 housing starts in the first two months of this year, up 72% on the same period in 2023.

Mr Mac Coille said ‘it’s worth noting’ the 63,000 residential transactions recorded in 2023 is the highest number recorded since the Property Price Register started collecting data in 2010. ‘In absolute terms housing supply is slowly improving, but the gap with robust housing demand is growing,’ he said.

‘With the supply situation still difficult, it is not surprising that house price inflation has regained momentum. We expect to see a mid-singledigit rise in Irish house prices in 2024, close to 4%.’

MyHome.ie boss Joanne Geary was encouraged by the number of housing starts in the first two months of 2024. ‘The figure of just over 7,000 starts is up 72% on the same period in 2023,’ she said.

‘Supply is slowly improving’