Press Release: SCSI Residential Property Market Monitor June 2022

The Key Findings:

• Estate agents expect national property prices to increase by an average of 3% over the next 3 months 
• Agents expect the rate of increase to moderate over the next 12 months after an initial post pandemic surge and are forecasting an annual increase of 4%
• The report includes affordability scenarios for Cork and some commuter counties such as Kildare and Meath
• According to these a couple on a combined salary of €89K who want to buy a new house and have the 10% deposit will face a shortfall of €64,000 in Kildare and €30,000 in Cork
• The only place the couple will afford to buy is in Meath

Friday 1^st July 2022: Estate agents who are members of the Society of Chartered Surveyors Ireland (SCSI)expect national property prices to continue to increase over the next year but say the rate of increase will fall.

According to the latest SCSI Residential Property Market Monitor agents expect property prices to increase by an average of 3% over the next three months and by 4% over the next year.

John O’Sullivan, Chair of the SCSI Practice & Policy Committee, said the moderation in the rate of increase is to be welcomed as annual rates of inflation of 14% or 15% which we have seen recently were simply not sustainable in the long term.

“While SCSI agents and valuers expect property prices to rise by an average of 4% over the next year that has to be seen in the context of the current record levels of inflation. Right now, the current rate of consumer price inflation is circa 8% which means that compared to consumer prices, the projected increase is actually a reduction of 4% in real terms.

While it’s not surprising that the number of agents citing economic factors as the key drivers of inflation has almost doubled – from 13% to 25% – the vast majority of agents still believe market factors – namely low levels of supply – will continue to underpin prices in the near term.”

“The economic factors include inflation, rising interest rates, supply chain issues and geopolitical uncertainty caused by Russia’s invasion of Ukraine. On the supply side, the Central Bank’s forecast for housing completions is 24,500 in 2022, then increasing to 29,000 in 2023 and 33,000 in 2024. This is a reduction of approximately 3,500 units compared with their previous forecast for the same period. With a population now in excess of five million for the first time since 1841, a trend towards smaller average household size, current positive net migration, plus commitments to provide accommodation to incoming refugees from Ukraine, it’s clear the need to unlock additional housing supply remains acute.”

“While lack of supply is still the dominant issue there are some signs the situation has improved slightly. While 85% of agents reported low levels of stock for sale at the end of 2021, this dropped to 77% in the latest survey. Due to the continuing rise in ‘Working from Home’ post covid many buyers are continuing to consider properties outside of the larger urban centres as long as they have a good broadband connection” Mr O’Sullivan said.

Current Affordability Scenarios

With property prices having increased by 118% from their trough in early 2013, the SCSI included three scenarios involving couples earning average salaries of €89,000* in the latest monitor. The scenarios demonstrate the affordability gap, if any, which exists between the total purchase limit available to a couple on average income looking to buy their first home and average new house purchase prices in three different locations.

Fig 1 – Three scenarios. The purchase prices listed here are average purchase prices based on current new housing developments in the three relevant counties.

According to these scenarios a couple on a combined salary of €89K who want to buy a new home and who have the 10% deposit having availed of the Help to Buy relief, will face a shortfall of €64,000 in Kildare and €30,000 in Cork.

In fact, the couple will only afford to buy in one of the three locations – Meath – and even then, by a modest margin of just over €6,000. John O’Sullivan said the figures showed that affordability and viability remained the critical issues for the Irish property market.

“These figures show that buying an affordable property remains out of reach for thousands of Irish people   on average salaries looking to buy their first home. Of course, you are also going to have thousands of people on salaries below this level. Unfortunately, with construction costs continuing to spiral and interest rate increases on the way it looks as if the situation facing first time buyers is set to become even more challenging. From a homebuilder’s perspective, if people can’t afford new homes that raises questions over their viability and overall housing supply.”

“While we have limited control over global supply chain issues and the cost of imported materials, we do have control over issues such as planning, procurement, utility connection charges, VAT, and development contributions. We know from previous SCSI reports that these soft costs make up around half the cost of delivering a new home and these are the areas the Government and local authorities need to focus on if we want to reduce the costs of delivering new homes.”

“Given the recent surge in the cost of materials and labour the need for supports for homebuilders is clear. While the SCSI agrees with the overall objective of the Croi Conaithe scheme – to get more Buy to Sell apartments into the market – we need to ensure any subsidies for homebuilders are capped and that the focus is on producing affordable units. From a buyer’s perspective the launch of the shared equity scheme next week will hopefully help bridge the affordability gap for some buyers.”

Rental Sector

As with sales, lack of supply remains a major issue in the rental sector and agents remain downbeat about new supply coming on stream. In fact, eighty-eight per-cent of survey respondents believe rental stock lost to the sales market will not be replaced within the next two years.  Agents said the top reason landlords are leaving the rental market is the complexity of rental legislation and regulations.

John O’Sullivan, who is an estate agent in Dublin, warned that traditional private landlords are continuing to exit the market.  “Many are uncertain what will happen next and commentary in the public arena such as suggestions that landlords may be restricted from selling a property, may further reduce supply in what is an already under supplied market. Whilst many new apartment developments enter the private rental market, the ever-reducing supply of private rental has greatly contributed to the current dysfunctional rental market.”

The full report is available on request or from Friday July 1^st at  www.scsi.ie

Ends.

For further Information

Contact Kieran Garry

GPR Communications

087/2368366

kierangarry@gprcomms.com 

*This average salary is taken from a sample public servant role (e.g., combined wages of two gardaí/nurses after 10 years’ service or two executive officers after c. nine years of service). Their total LTI maximum loan limit is €311.5k. As first-time buyers they require a 10% deposit.  

Note to Editor

SCSI Residential Property Price Monitor June 2022 

The SCSI Residential Property Price Monitor is a quarterly sentiment survey of SCSI members, consisting mainly of estate agents, auctioneers, and surveyors. While the principal focus is on participants’ house price expectations, the survey also canvasses opinion on the factors underlying these views, and on members’ assessment regarding the level of transactional activity in the market. The survey is a snapshot of respondents’ expectations at a particular point in time. The survey was conducted in May 2022 and received 130 responses. The SCSI would like to thank all members who share their market insights and expertise to inform our independent market reports.