The emergence of new homes as a real option for buyers for the first time in a decade is set to drive a less-heated property market in 2018, estate agents have predicted.
A survey carried out for the Irish Independent by the Real Estate Alliance Group has found that agents throughout the country expect prices to rise by 7.5% on average in the next 12 months.
Many new developments concentrated on the east coast, with Dublin agents predicting that prices in the capital will rise by 8.2% next year.
This comes off the back of a 2017 which saw prices increase by 11.3% nationally and 13% in Dublin city and county before slowing down somewhat across the country in Quarter Four.
Agents in two of the three main cities outside Dublin are optimistic about 2018, with rises of 8% predicted in Limerick (8.5% in 2017) and 7% in Galway, which experienced 9.6% growth in 2017.
Galway agents REA McGreal Burke are expecting a lot of new developments which are almost at construction stage to dominate the market in the back end of the year, easing the poor supply level in the city.
However, Cork is looking at a more modest 5% increase, on a par with that achieved in 2017.
REA O’Donoghue Clarke report that the Leeside city is suffering from a lack of second hand supply, fuelled by the effects of the Central Bank’s €220,000 deposit limit in a city where average house prices are €310,000.
The outlook for the commuter areas surrounding the capital is continuing to improve after a cautious 2017, which saw prices rise by 10%.
Counties around Dublin are predicting a rise of 7.2% on average after two years which saw Kildare and Wicklow lag behind national rates of increase on 7%, but Meath outstrip the country on 14% due to the lower average house cost relevant to the Central Bank limit.
An increase in mortgage-approved buyers and the Help To Buy Scheme saw first-time buyers return to viewings in force over the past 12 months.
However, a shortage of suitable supply caused prices to appreciate, and REA agents in the capital are predicting that new homes will drive a bright outlook for the new year, freeing up some supply of second hand stock in the market.
The Luas has proved to be a huge driver of interest with the Cross City line and extension to Broombridge opening up a new range of commuting and living options.
There is still less appreciation anticipated in the upper ends of the family home scale as serious issues around the income multiplier and the deposit rates put the brakes on many second-time buyers trading up.
“Our members anticipate that there will be an increase in new homes on the market in 2018, which will have a positive effect on a market that is under-supplied at the moment,” said REA spokesperson Healy Hynes.
“As an example of supply driving inflation, Kilkenny was Ireland’s highest rising county in 2017, with an increase of 23.3% in the price of the average semi-detached house.
“The increase was even higher in Kilkenny city where REA Boyd reported a 27% upturn in 2017, and is predicting a further 15% rise in 2018 – completely due to lack of supply.
“In areas such as Laois, prices are still 10-15% below breakeven for new developments, and low supply led to 18% rises in 2017, while some counties are predicting that it could be five years before they see new developments.
“Figures from the Property Services Regulatory Authority show that 2017 (47,000 units to date) is just about on a par with 2016 (49,720) in terms of property transactions.
“That is 40% below what it should be in a normal market, which should see 80,000 properties changing hands.
“While the Help To Buy Scheme has had a positive effect, we would like to see the banks taking a more pragmatic view of people’s long-term rental payments in terms of mortgage applications.
“The provision of social housing by county councils is one of the major keys to increasing supply and relieving pressure on rental markets.
“The lack of local authority house building is driving an ever-upward spiral in rental demand, which in turn is locking people into a cycle where they cannot save for their own property.”
The return of investors to the market has been reported in Dublin, particularly on the southside of the city where REA Ed Dempsey in Clonskeagh is predicting a 10% rise in 2018, with the market slowing down due to an increase in supply.
REA McGee in Tallaght are predicting 8% growth in Dublin 24 due to an abundance of first time buyers entering the market and a high volume of non-Irish buyers opting for apartment living.
While agents in Donegal are predicting a 5% increase generally, REA McElhinney in Bundoran feels that uncertainty over Brexit and the poor sterling exchange rate will lead to no growth in 2018.
REA Seamus Carthy in Roscommon is predicting that supply may well dry up if the State does not act to aid the development of new homes.
“We are going to hit a brick wall with supply as developers can't get back in at an average price of €145,000 in this area. Supply is going to totally dry up as the Government is taking too much off the costs of building,” said Seamus Carthy, who reports that values for any property under €150,000 is increasing at speed.