MyHome report shows market stabilising

This quarter’s MyHome report shows that asking price inflation slowed to 2% in Q2 2023 and to 0.6% in Dublin. However, asking prices rose by 4% in Q2 2023, a healthy gain ahead of the busy summer trading season and following three consecutive declines. The message from the data is that market pricing is stabilising and may even be gaining some momentum.

Vendors also look to have realistic expectations. Transaction prices were being settled 5-6% above asking prices last summer, indicative of the froth in the market and intense competition among homebuyers. This premium was 1.4% in Q2 2023 –down but still in positive territory. In contrast, Zoopla reported in June that UK sellers were accepting discounts to the asking price of 3.8% on average.

The reality is that Ireland’s housing market remains exceptionally tight. The average time to sale agreed in Q2 2023 was still close to a historic low of 3.3 months. There are currently just 14,000 properties listed for sale on MyHome, still well down from pre-pandemic levels which exceeded 20,000.

Housing demand remains resilient. There were €1.27bn of mortgage approvals in May, a fresh record high. This represents 11.5% volume growth in the numbers of homebuyers with mortgage approval. The average approval for house purchase was €298,600 in May, up 3.5% on the year. Despite the European Central Bank’s (ECB) rate hikes, homebuyers are still taking on more debt, pointing to upward pressure on house prices in H2 2023.

That there is still an imbalance between housing demand and supply is also evident in the Consumer Price Index (CPI) private rents index, up by 0.6% in May and by 7.8% on the year. This also shows that a correction in valuations is already underway. The ratio of the Residential Property Price Index (RPPI) to CPI private rents has fallen by 6%, since a peak in early 2022, implying that there is now upward pressure on rental yields.

The resilience of the homebuilding sector has been a positive development, despite widespread concerns on viability. There were 30,900 housing completions in the year to Q1 2023 – well ahead of expectations. Furthermore, there were 13,000 housing starts in the first five months of 2023, up 7.4% on 2022 – this growth looks to entirely reflect apartment construction in Dublin.

All in all, MyHome’s Q2 report bears out our view that the Irish housing market should prove more resilient than its peers, especially the UK, given the enormous imbalance between supply and demand and stimulus such as the Equity Loan Scheme and the decision to loosen the mortgage lending rules.

Certainly, a fall in Irish house prices in 2023 is still plausible and cannot be ruled out, given the prospect of further ECB rate hikes, but it now looks less likely. We have left our forecast for Irish RPPI inflation unchanged at 1.5% through 2023, but have revised up our forecast for housing completions to 29,500.

For more information on the residential property market, download a full version of the Q2 2023 MyHome report.