While the majority of property market professionals expect house prices to continue to increase nationally – albeit at a slower pace – the number who expect prices to remain steady or decline over the next 12 months has increased.
According to the latest Society of Chartered Surveyors Ireland / Central Bank of Ireland Housing Market Survey, 59% of estate agents expect house prices to increase nationally in the coming year, down from 78% in Q2.
In addition, the rate of inflation continues to slow dramatically. The agents surveyed expect national price inflation to be 2% for the coming year – down from 5% in Q2 – and 5% over the next three years – down from 8%. This is the third survey in a row in which the predicted rate of price inflation has eased.
In Dublin, price expectations have actually increased from 2% to 3% for the one-year horizon but have also fallen to 5% over the next three years – down from 6%.
A number of factors – specifically the perception of value and Brexit – were deemed to be the primary drivers behind the anticipated price changes at national level.
In Dublin, respondents viewed the construction of new units and the Central Bank’s macroprudential mortgage measures as the joint primary factors for their views.
The SCSI/CBI survey is a sentiment survey of chartered auctioneers and estate agents as well as industry stakeholders such as economists, market analysts and academics.
Estate agent and SCSI member John O’Sullivan, said it was clear from the survey findings that affordability is now impacting house price inflation and as a result the rate of inflation is moderating. He said this was welcome news for the market and the general economy.
“The cost of accommodation whether as a purchaser or tenant is the single biggest challenge faced by those in areas of high demand. While price inflation has waned for high-value property it’s likely that it will also slow for other property classes over the short term. That said the entry-level, where demand is very high, is the most active and the least impacted.”
“The main reason the rate of inflation is slowing is due to an increase in supply which is down to new developments coming on stream and as mentioned in the survey, the number of buy to lets being offered to the market as landlords continue to exit the rental market.”
O’Sullivan who is a Director with Lisney in Dublin said another factor was that in some cases asking prices have been set too high based on vendor and agent expectations.
“If prices are pushed beyond buyers’ ability to pay, its inevitable prices will come back. That said the market is reasonably active and one of the main challenges the sector faces is the time it takes to close a sale due to the protracted legal process.”
“While the sale of BTLs may help increase the supply of residential properties in the short term, it is not positive for the rental market. According to the survey the number of BTL owners coming out of negative equity was deemed the key factor by 35% of respondents for the number of residential units coming onto the market at the national level. Many landlords also blame restrictive rent legislation and low rental returns – which may be due to Rent Pressure Zone legislation which limit rent increases to 4% in Dublin.”
“Agents report that for every three investors selling only one investor is buying which given the very low levels of supply, particularly in urban areas, is not good news for the rental market” O’Sullivan concluded.