The main findings:
- SCSI members expect residential property prices to increase by an average of 1% in 2024
- 63% of agents believe prices are either at peak or close to it and will level off soon
- Survey finds 36% of sales instructions in Q4 were landlords selling their investment property – down 4% on last year
- 76% of agents are reporting a shortage of supply – an increase of 10% on last year
- Case studies show new homes are affordable for first time buyer couples on combined gross income of €89,000 in most parts of the country – but in Greater Dublin Area the unaffordability gap is €62,000 – In Galway its €22,000
- The Northwest, Midlands and Southeast are the most affordable regions for first time buyers
- Just over a decade after they were introduced, 69% of agents say BER ratings are now an important or very important factor in relation to the level of an offer
- Upcoming change of Government / change of policy cited by some respondents as an issue in the elevated sales of buy to lets and a factor affecting future house prices
Tuesday 23rd January 2024: A new survey by the Society of Chartered Surveyors Ireland indicates residential property prices will continue to stabilise in the medium term with estate agents forecasting an increase of just 1% in 2024. Almost two out of three respondents (63%) believe property prices have either peaked and should start to decline or are close to peaking and will level off soon. The report found the main factors influencing expectations of house price movements are the supply of housing, interest rates and changes in the economy.
Case studies compiled as part of the survey – see below – show that while new 3 bed semi-detached homes are affordable for first time buyer couples with combined gross earnings of €89,000, they remain out of reach by tens of thousands of euro for first time buyers in the Greater Dublin Area. This means that in Dublin, Wicklow, Meath, and Kildare the affordability gap is about €62,000, in Galway its €22,000.
The case studies, which are based on a couple employed as public servants – a garda and a nurse with ten years’ experience – indicate that the Northwest, Midlands, and Southeast are the most affordable regions for first time buyers.
John O’Sullivan, Chair of the SCSI’s Practice and Policy Committee said that after several years – during and immediately post covid – where the market experienced double digit price increases, it looks now as if prices are set to consolidate for the medium term.
“SCSI agents believe we will see modest growth in values in what will most likely be another challenging year for the property market. Three out of four agents or 76% of respondents are reporting a lack of supply to meet demand, that’s up 10% on last year. So, while price inflation has been dampened following the dramatic rise in interest rates, they have also been underpinned by the lack of supply.”
“That said prices are levelling off below current inflation rates and this is a welcome development for potential buyers as their purchasing power will increase as affordability improves. While the current supply of new homes is undoubtedly insufficient, SCSI agents say initiatives aimed at increasing supply are kicking in and that the situation will improve in the coming years. While this is most welcome, the skills shortage in the construction sector remains a critical issue which needs to be addressed.”
“Interestingly after supply, interest rates and the state of the economy, the fourth factor which members say will influence price movements is a potential change in Government and or housing policy. We know there is going to be a new Government in the next 14 months or so and some members are clearly picking up on the need to build on progress to date and to avoid knee jerk policy shifts which could introduce uncertainty into the market.”
The SCSI’s Annual Residential Review and Outlook report – now in its 41st year – also found that one in three of properties coming on the market are buy-to-lets. On average 36% of residential sale instructions to agents in Q4 were landlords selling their investment property. While this is down 4% from last year, Mr O’Sullivan said it shows investors and landlords are continuing to exit the market in very significant numbers.
“While new taxation measures announced by the Government in Budget ’24 aimed at encouraging landlords and investors to remain in the market are only being implemented now, SCSI agents are saying the main reason rental units are continuing to come on the market in such numbers is that rent legislation is too complex and restrictive. The other reasons given are a potential change in Government / housing policy, net rental returns being too low, coming out of negative equity and pressure from lending institutions to liquidate assets.”
“We will have to wait and see what impact the new taxation measures will have but for now its clear landlords are continuing to exit the market in substantial numbers. And with mortgage approvals for residential investment lettings down 20% year on year, it’s clear those leaving are not being replaced in the same numbers by new investors. This in turn is going to affect the number and choice of rental units available on the market and contribute to higher rents.”
Sales not proceeding
There has been a steady increase in the proportion of SCSI agents reporting that sales are not proceeding. In the survey 27% of agents said there had been an increase in the numbers of sales not proceeding while 63% of agents reported that the level of sales not proceeding remained the same as the preceding six months, when the issue first came to prominence.
In its analysis the SCSI noted an increasing prevalence of members reporting significant frustration regarding delays within the probate process and in contacting the probate office. Agents highlighted challenges regarding an inefficient and lengthy conveyancing process and how this is impacting on sales as well as other issues such as planning irregularities, non-compliance with building regulations and boundary challenges.
Growing importance of BER Ratings
It is now just over a decade since Building Energy Ratings were first introduced and the SCSI thought it timely to ask about them and their impact on the sales process. Members believe there is a widening price gap between energy-efficient homes – rated B or higher – and their less efficient counterparts – rated C or lower. This is due to the time and costs required to pay for refurbishments to the latter, despite the availability of grants.
In the survey 69% of agents said they believed BER ratings are an important or very important influence on the level of offer made on a property.
Mr O’Sullivan said that while they started out initially as a mere footnote on property brochures, they were now front and centre in buyers’ thoughts.
“This is due to heightened environmental awareness, the recognition of the pressing need to tackle climate change, rising energy costs and the attractiveness of green mortgages with lower interest rates. Today energy-efficient homes are among the most coveted property types with some research putting their value circa 25% higher than non-efficient homes. It’s clear that trend is going to intensify.”
SCSI New Home Affordability Tracker
The average market value of a new three-bedroom semidetached home in the Greater Dublin Area (GDA) is €464,036 as reported in the SCSI Real Cost of New Housing Report 2023. Using figures from that report, these case studies examine affordability within the scenario of a couple who are first time buyers and employed as a garda and a nurse. The average combined gross incomes of two professions (with 10 years’ experience) in Ireland, is €89,000. Clearly there will be differences for buyers whose earnings fall below or exceed this level.
For these case studies their total LTI maximum loan limit is €356,000 (4 times gross salary). For those who earn less than this income level, the disparity between their borrowing capacity and the cost of purchasing a property will be even greater. As of December 2023, the GDA is the most unaffordable followed by Galway. The most affordable locations are the Northwest, Midlands and Southeast.
Mr O’Sullivan said that whilst a more stable market with values levelling off will assist those wishing to purchase a home, the increasing construction costs, and uncertainty of where such costs will be in the future poses questions for the future viability of new projects. “Right now, new housing is most viable in the Greater Dublin Area, and this is where its most unaffordable. In very many cases the areas where new home building is least viable are the more affordable areas, such as the Midlands and Northwest. To restore balance to the property market we need to ensure there is an adequate delivery of new housing through other avenues such as AHBs, via the Land Development Agency and through direct public housing delivery etc.”
Table 1. Affordability of purchasing a new three-bedroom semidetached home. Scenarios are based on combined gross wages of a garda / nurse couple with ten years’ experience or two civil servants at executive officer level with circa 9 years’ experience.
Note. Figures exclude First Homes Ireland Scheme. Help to Buy Scheme assumed to be included within the 10% deposit amount. Source SCSI The Real Cost of New Housing Delivery 2023*
The SCSI’s Annual Residential Property Review and Outlook Report 2024 is available at www.scsi.ie or on request.
For further information
Contact Kieran Garry
Note to Editor
*The SCSI Real Cost of New Housing Delivery 2023 report provides multiple recommendations to increase new supply and reduce the costs of delivery to improve affordability, such as: removal of development levy costs; setting clear targets for constructing new units via modern methods of construction; and, design flexibility: allowing local authorities to approve alterations to specifications of buildings that do not materially alter the planning permission but allow for the use of more cost-effective building materials.
About the Survey
The SCSI Annual Residential Property Review & Outlook 2024 is a sentiment report, which is informed by the professional opinion of over 140 SCSI agents across the country and bring together their insights and local knowledge on Ireland’s sales and rental market. The questionnaire was completed by SCSI members in December and January.