Getting ready for the housing market to re-open

This quarter’s MyHome report shows the rate of asking price inflation moderating from 6% to 4% in the first quarter of 2021. This isn’t surprising as we suspect last quarter’s figure was inflated because COVID-19 distorted seasonal patterns. Still, the asking price inflation data suggest the Central Statistics Office (CSO) Residential Property Price Index (RPPI) inflation rate will likely accelerate above 3% in the coming months.

A striking feature of the report is how housing market activity has persevered through the third lockdown. Residential transactions are actually up on the same period of 2020 – in part because the summer trading period was delayed last year with transactions being finalised in 2021. However, estate agents have also adapted their businesses to the restrictions. Remarkably, new listings for sale in the first quarter were down only 30% compared with 2020 versus 80-90% annual falls during the first lockdown.  

Housing market activity should bounce back

All the data suggest that housing market activity should bounce back rapidly once the restrictions are lifted. Mortgage approvals in January were up 12% on the year, with the average approval up 8% to a fresh cyclical high of €256,000. So there is no evidence of tightening credit conditions holding back homebuyers.

Similarly, traffic through the MyHome website is up 13-30% on different metrics, users, sessions and page views. Our recent survey of homebuyers on MyHome shows that almost half expect house prices to rise by up to 10% over the next 12 months and 60% had saved additional funds for a deposit since the onset of the COVID-19 pandemic. On that point, it is worth bearing in mind that household deposits in the banking system grew by 6%, or €7.3bn, in the 12 months to February, equivalent to the 28,500 mortgage loans for house purchase in 2020 worth €6.9bn.

Add into this mix the fact that housing completions will be delayed by the closure of the construction sector and that the stock of homes listed for sale on MyHome is now just 12,138, down 36% on the year. This leads to a similar conclusion to that in our last report – too much cash is chasing too few homes, and the risk to our forecast for house prices to rise by 3% in 2021 is probably to the upside.