Construction BUSINESS

According to Marian Finnegan, Chief Economist at Sherry FitzGerald Group, the average value of Irish houses and apartments rose by 2.5% in the second quarter of 2017, bringing growth in the year to date to 4.4%. This represents an increase on the 2.7% recorded in the opening six months of 2016.

House prices in Dublin were somewhat ahead of the curve with average values increasing by 2.8% during the second quarter of 2017. Prices in Dublin have grown by 4.7% in the year to date, compared with 1.8% in the same period in 2016.

When Dublin is excluded from the national figure, the quarterly increase is 2.1%.  In the year to date, house prices for the rest of Ireland increased by 4.1%, a moderate uplift on the 4.0% recorded in the same period in 2016.

In the regional centres outside of Dublin, Galway recorded the highest increase of 4.9% during the opening half of 2017, while prices in Limerick and Cork increased by 3.4% and 3.1%, respectively.

Marian Finnegan said: “The increase in house prices reflects a natural uplift in demand coupled with a significant depletion in the stock of available property on the market in the opening months of the year. The reduction in available 2nd hand supply is most noticeable in Dublin, where the quantity of houses and apartments on the market fell by 30% year on year, which explains the upward trajectory in prices.”

The Property Price Register reveals that approximately 10,800 transactions were recorded during the first quarter of 2017 with a total value of €2.8 billion. Due to the time lag in logging data to the Property Price Register, quarter one data is the most accurate data available. If one excludes multi-family/portfolio sales, the figure declines to approximately 10,200, of which 3,300 were in Dublin. On an annual basis, the volume of sales grew by 9% nationally and 10% in Dublin.

In comparison to the increasingly limited second hand stock, the volume of new dwelling sales recorded on the Property Price Register rose by 23% nationally during the opening quarter of 2017, with a 33% increase in Dublin.

It is worth noting that the average value of new dwellings sold increased by 8% on a national basis, while the average value in Dublin remained constant.

In contrast, average values of new dwellings increased by 38% on a national level in the year to quarter one 2016 and by 9% in Dublin in the same period. The greater stability in the price inflation of new dwellings this year does point to an increase in the volume of starter homes being sold on the market, an early indicator of the positive impact of the ‘help to buy’ scheme.

Comparing the Property Price Register data to mortgage drawdown data from the Banking and Payments Federation Ireland during the opening quarter of 2017, indicates that 43% of single property transactions did not have a mortgage attached to the transaction, signifying that these properties were likely to have been bought with cash. The comparable figure in the opening quarter of 2016 was 48%. This points to an increase in mortgage drawdown activity in 2017, an early indicator of the positive impact of the relaxation in the macro prudential rules.

Owner occupier levels remained strong during the opening half of the year accounting for 71% of all purchasers, virtually unchanged from the same period in 2016.  Notably first-time buyers accounted for half of all owner occupiers.

Finally, an analysis of vendor and purchaser profiles in the opening half of 2017, reveals a continued outflow of investors from the buy to let market. Reflecting the trends of recent years, 33% of vendors were selling their investment properties, while investors entering the market represented only 20% of purchasers. This trend continues to deepen the supply side crisis in the lettings market, which is already incredibly challenging.

In conclusion, Ms. Finnegan said; “The performance of the residential market during the opening six months of the year was largely as anticipated. Underpinned by the strength of the economy and the relaxation in macro prudential rules, the market experienced an uplift in demand. The limited supply of property most notably in the opening quarter resulted in an increase in house prices in Dublin, a trend which we anticipate will continue for the remainder of the year.

That said, there is a greater level of constancy in the average price of new dwellings, which is a positive indicator for the market. This, together with the reduction in the proportion of cash purchasers and the moderate increase in activity, points to a greater level of stability in the wider market.”