In a revealing new report by the Society of Chartered Surveyors Ireland (SCSI), the residential property market shows signs of stabilisation, with a modest forecasted increase of 1% for 2024. This expectation is shared by a significant majority of estate agents, with 63% suggesting that property prices are at or nearing a peak. The SCSI’s report underscores the profound influence of housing supply, interest rates, and economic shifts on property prices.
The Affordability Chasm: Dublin vs. the Northwest
A particularly stark contrast is drawn between the affordability of homes in various regions across Ireland. While a combined gross salary of €89,000 may suffice for a first-time buyer couple to afford a new three-bedroom semi-detached house in regions like the Northwest, Midlands, and Southeast, the dream remains elusive in the Greater Dublin Area (GDA) and Galway. The affordability gap in the GDA is a substantial €62,000, while in Galway, it’s €22,000. This disparity is highlighted in Table 2 of the SCSI’s report, demonstrating the challenge faced by public servants such as gardaí and nurses with a decade of service.
Market Consolidation Post-COVID
John O’Sullivan, Chair of the SCSI’s Practice and Policy Committee, reflects on the tumultuous period during and post-COVID, marked by double-digit price surges. The current climate indicates a phase of consolidation, with restrained growth in property values. This is in part due to the dampening effect of increased interest rates, but also due to a persistent shortage in housing supply, a concern that has intensified by 10% over the last year.
Supply Shortage and the Future of Construction
Despite the price stabilisation, the supply of new homes fails to meet the demand, a situation that is expected to improve gradually with initiatives aimed at boosting housing stocks. However, the construction sector is grappling with a critical skills shortage, an issue that needs immediate redress to sustain and expedite growth in housing supply.
Government Policy and Market Stability
The SCSI report also highlights the potential impact of a change in government and housing policy, with members advocating for continuity and caution against abrupt policy shifts that could unsettle the market.
The Exodus of Landlords and Rental Market Dynamics
Landlords continue to exit the market, with 36% of residential sale instructions in Q4 being landlords selling their investment properties. This trend persists despite new tax measures introduced in Budget ’24, with complex rent legislation and low net rental returns cited as contributing factors. With mortgage approvals for residential investment lettings also declining by 20%, the rental market faces a contraction in the number of available units and potentially higher rents.
Increasing Sales Fall-through and Conveyancing Woes
The proportion of sales not proceeding is on the rise, with 27% of agents reporting an increase. The SCSI attributes this to inefficiencies and delays, particularly within the probate process and conveyancing, which exacerbate frustrations and impact transaction completions.
The Growing Weight of BER Ratings
Building Energy Ratings (BER) have become a significant factor in the sales process. Properties with higher energy efficiency command higher prices due to the cost savings on refurbishments and the attractiveness of green mortgages. The SCSI report estimates that energy-efficient homes can be valued up to 25% higher than less efficient ones, a gap that is expected to widen.
New Home Affordability Tracker
The SCSI’s New Home Affordability Tracker outlines the stark reality of the property market, particularly in the GDA, where the average market value of a new three-bedroom semi-detached home stands at €464,036. This is juxtaposed against the average combined salary of public servants with ten years of experience, highlighting the affordability issues that persist.
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While a stable market with leveling values is a boon for potential homebuyers, increasing construction costs and market uncertainties pose significant challenges. The SCSI underscores the importance of ensuring an adequate supply of new housing through various means, including public housing delivery, to restore balance in the property market.
The detailed insights and comprehensive analysis presented in the SCSI’s Annual Residential Property Review and Outlook Report 2024, now in its 41st year, are available for further review on the SCSI website here: https://scsi.ie/wp-content/uploads/2024/01/SCSI_ResidentialPropertyReview_2024-Report.pdf