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Jul 2 2018, 07:00 IST/BST
The MyHome data for Q2 2018 show asking price inflation falling to 7.2%, consistent with our forecast for house price inflation to slow to 8% (from its current 13% rate) by December. The stock of homes listed for sale on MyHome saw its first significant gain since 2015 – signalling improving liquidity. Again, this gives us confidence in our view that the Irish mortgage market should expand by 26% to €9.2bn in 2018. Homebuilding will help, with the number of new developments listed on MyHome up 20% on the year.
MyHome asking price inflation was 7.2% in Q2 2018, the slowest pace since 2016. In Dublin, asking price inflation was 6.8% – down from 11% at the turn of the year. This slowdown in asking prices should translate into transaction prices over the next three to six months. Hence, we are sticking with our forecast for 8% Residential Property Price Index (RPPI) inflation through 2018. The bigger picture is that stretched affordability, coupled with the tighter Central Bank rules, is containing price growth – particularly in the capital, Dublin.
The imposition of the tighter Central Bank rules may be restraining house price inflation but is having little impact on liquidity in the housing market. The stock of homes listed for sale on MyHome increased by 3.7% on the year to 21,600 – the first positive growth since 2015. In Dublin, the stock rose by 25% to 5,000 homes. We also estimate that residential transaction volumes rose by 6% in H1 2018. Meanwhile, mortgage lending grew by 22% in the year to Q1 2018 to €1.7bn – despite the impact of the poor weather. Although mortgage approvals were up just 12% in the first five months of 2018, this growth has probably been temporarily depressed as banks adjust to the new Central Bank rules.
The gradual pick-up in homebuilding is starting to contribute to supply, with 409 new developments listed on MyHome – up from 342 in mid-2017. In addition, new data show 14,446 new homes completed in 2017, complemented by 1,091 units from Celtic Tiger ghost estates. These figures are below the 19,300 electricity supply grid connections in 2017 but well above the sub-10,000 figures posited by some commentators as the true level of homebuilding. Given 27% growth in completions to 3,526 in Q1, no doubt held back by the poor weather, a completions figure close to 20,000 in 2018 is possible.