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Double-digit inflation returns to Irish housing market

01st July, 2021

This quarter’s MyHome data suggest that the Irish housing market is red hot, with double-digit inflation returning for the first time since 2018. Asking price inflation is now running at 12.9%, broad based across Dublin at 10.6% and the rest of Ireland at 13.6%.

The buoyant asking price data should not be taken as good news. Whilst demandhas remained robust, reflecting that pandemic-related job losses have been concentrated amongst younger age groups and lower paid workers, price gains primarily reflect the lack of housing supply. There were just 12,700 homes listed for sale at end-June, down 31% on the year and equivalent to just 0.6% of the stock of 2m homes.

It is worth bearing in mind that the 12.9% annual inflation rate is compared with the first lockdown period. In Q2 2020, prices fell by 1.5% before a 5% rebound in Q3. So, the annual rate of asking price inflation will likely fall back into single-digit territory in three months. Nonetheless, the clear message from the MyHome report is that homebuyers are becoming increasingly desperate to secure homes.

The average time to sale agreed has fallen back to a record low of 3.8 months, indicating that whatever stock is available is being purchased ever more quickly. Once again, transactions are now being settled above asking prices.

Unfortunately, estate agents have not yet been able to convince vendors who put off sales due to COVID-19 to put their homes back on the market. Whilst new listings are back at 2019 levels, there has not yet been any period of ‘catch-up’. Hence, the stock of homes for sale on estate agents’ books remains at exceptionally low levels.

The news on homebuilding has been a little better. We still expect 21,000 completions in 2021, though this will still be well short of demand but better than more pessimistic projections. Notably, housing starts were close to 5,000 units in April, indicating a degree of catch-up after the closure of the sector during the third lockdown.

Nonetheless, the news that asking price inflation has returned to double-digit levels will heap even more pressure on the government to address the housing crisis. Unfortunately, there are no easy answers to solve Ireland’s structurally high build costs and lack of construction sector capacity.

For more information on the residential property market, download a full version of the Q2 2021 myHome report.

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