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MyHome report points to price gains in 2021

08th January, 2021

This quarter’s MyHome reports points to an acceleration in asking price inflation to 6% in the final quarter of 2020, the fastest pace in almost three years. This pressure has not yet turned up in transaction prices, although the Central Statistics Office (CSO) Residential Property Price Index (RPPI) rose by 0.5% in October, the sharpest monthly increase in over one year. It is probably only a matter of time before the official measure of house price inflation accelerates.

This trend confounds warnings made early in 2020 that Ireland’s housing market could suffer ‘double-digit’ price declines. Ireland is not alone in this regard. In the United Kingdom, a range of measures indicate that house price inflation now exceeds 6%. It has become clear that job losses have been concentrated among the lower-paid, part-time and younger workers who are less likely to be homebuyers. Also, government supports have helped to protect incomes, removing the risk of forced selling.

The data also suggest that any negative impact on the housing market from more risk averse mortgage lending has been short-lived. Mortgage approvals hit a new cycle high of €1.1bn in October with the average approval rising to €250,000 for the first time, up 5% on the year, pointing to inflationary pressure in the system.

Inadequate supply of housing

Meanwhile, the problem of inadequate housing supply has only become more acute. There are now just 13,900 homes listed for sale on MyHome, down 28% on the year – a record low. Although new listings for sale have recovered, they have not yet compensated for lost time during April-June when the housing market was effectively shut.

Moreover, the impact of the COVID-19 crisis on homebuilding may be a more slow-burn affair than first thought. Housing completions bounced back quickly in Q3 as existing development projects were quickly re-started as restrictions lifted. However, housing starts equalled 5,441 in Q3, down 28% on 2019. Worryingly, there was little improvement in October’s figure of 2,222, still down 30% on 2019.

So COVID-19 has tightened Ireland’s housing market considerably. As we head into 2021, homebuyers have saved additional funds to purchase homes, with sentiment helped by the likely recovery in the economy as vaccines are disbursed. Given that homebuilding will remain impaired, with banks seeking lending opportunities, too much cash is chasing too few homes – which can only push prices higher.

For more information on the residential property market, download a full version of the Q4 2020 myHome report.

 

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