Demand will bring stability to new homes market
GROWTH in the construction sector slowed down slightly in December, according to the Purchasing Managers Index, but there is no doubt that in the residential sector new home commencements have increased steadily over the past 18 months.
The primary reason is that there is now a stable supply of new home buyers who can attain mortgage approval for houses in the €250,000-€400,000 price bracket.
The Property Price Register shows that the number of new house transactions has increased, progressively since 2013, with 1,718 in that year in Dublin, Kildare, Meath and Wicklow.
The figure increased to 2,393 in 2014, 3,057 in 2015 and indications show it will reach in the order of 3,500 when the final tallies are in for 2016.
On the finance side of the residential market there were over 29,498 mortgages drawn down in 2016 up from 27,324 in 2015, a steady 8pc increase over the 12 months.
Nationally, property price inflation has risen 8.6pc in 2016 and remains at 31.5pc below the peak of 2007. In Dublin, residential property prices increased by 5.7pc in the year to December 2016, whereas apartments increased 7.9pc in the same period.
With transactions, mortgage draw downs and house prices increasing at a balanced pace, we may now see new housing start-ups increase to a level which will allow the 25,000 homes required to be completed annually.
We witnessed the recovery start in late 2013 with sentiment changing in the market like the flick of a switch. This instantly saw the return of buyers, albeit with limited access to mortgages and very cautious about purchasing a home in a new development.
They had many worries and often voiced their reservations to us. Firstly, would the developer have sufficient funds to construct the scheme or was there a danger that he might go into receivership during construction. Secondly, would they be left in a partially completed ‘ghost estate’ as happened to many developments during the crash.
Now, just over three years on, and with demand steadily increasing, the intervention of the Government with the help-to-buy scheme in Budget 2017 and the Central Bank’s lending rules relaxed to allow first-time buyers to borrow 90pc, we have noticed the new home (and second hand) buyer purchasing their home with a degree of confidence. A necessary feeling when you are making possibly the biggest purchase of your life.
Demand will influence the supply and with the Central Bank keeping a watchful eye on the levels of credit being released to home buyers, house prices will in turn increase at a steady pace.
The supply of much-needed new homes has four key elements – buyers, developers, local authorities and banks. Supply will only come at a steady pace if we have a functioning market with a steady demand from assured buyers, a construction industry that is geared up to build, local authorities assertively putting roads and services in place and a functioning banking system. Working together will put more people in much needed homes.