House prices could rise by over 12% by year-end, survey shows

House prices in some parts of Ireland are increasing at a rate not seen since just before the worst property market crash in the history of the State in 2006, according to fresh data.

The Institute of Professional Auctioneers and Valuers (IPAV) said a chronic supply shortage, high rents and low fixed-rate mortgages as well as an increased interest in remote working were driving the spike which could “have deeply damaging consequences” in the long term.

The data suggests that house prices increased nationally by 6.25 per cent in the first half of this year, with a year-on-year increase of in excess of 12 per cent likely if the current trend continues

The survey charts house prices actually achieved, rather than asking prices and reports that the asking and achieved prices “are diverging to a considerable degree” with some properties selling for substantially above their asking prices.

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According to the data, the property market comprising two-bedroom apartments and three- and four-bedroom semi-detached homes will increase by at least 10 per cent in 2021, while other one-off houses are likely to increase by a lot more.

‘Resilient’ market

The report points to a “very resilient” market and says if demand continues to outweigh supply and interest rates remain low, prices are likely to keep climbing. It says more new properties will have to be built and much of the vacant stock of about 100,000 homes will have to be brought back into the market.

The survey shows double-digit growth for three-bedroom homes in Waterford and Limerick with Tipperary, Meath, Louth and Cavan close behind, with 9 per cent and more growth. Price increases of in excess of 8 per cent were recorded in Co Dublin as well as Dublin 15, Dublin 7, Carlow and Kildare.

Average prices for three-bedroom semis nationally rose by 6.6 per cent but as many as 23 of the 38 markets surveyed showed increases above that level.

Waterford recorded 11.1 per cent price growth for three-bedroom semis and Limerick saw 10 per cent-plus price growth for both three- and four-bedroom semis in the first six months of the year.

A number of other market sectors came close to the double-digit price growth with a further 14 areas seeing four-bed semis exceed 9 per cent and four areas saw this level attained for three-bedroom semis.

In the two-bedroom apartment sector Kildare was the only area to achieve 9 per cent price growth. In addition four other areas, comprising Limerick, Carlow, Meath and Laois, achieved growth of more than 8 per cent for two bed units.

Blended working

The report says some of the area-specific increases are accounted for by new blended working opportunities where people don’t have to operate from formal office environments on a full-time basis.

The chief executive of the IPAV Pat Davit said there was “a deeply compelling and growing logic as to why people would want to buy their own homes”.

He pointed out that for “some time it has been cheaper to service a mortgage than pay rent on a similar property”, while “greater competition in the mortgage market now means that a mortgage can be secured for up to 30 years at a relatively low fixed interest rate for the entire period of the mortgage. This is a game-changer that brings Ireland closer to, if still way ahead of, the norm within the euro area. It gives mortgage holders security in relation to their future financial outlay.”

He warned that while accelerating house price increases were “acceptable in the short term, but if prolonged [they] can have deeply damaging consequences – for individuals, families and for society at large”.

He suggested that the “only real answer to the current situation is to increase supply. While there is a policy consensus around the need for more homes to be built, and at affordable prices, a myriad of policy initiatives in the last decade has not delivered on this declared objective”.

He said that supply is “so tight that in some cases would-be sellers are not putting their homes on the market, lest they may not be able to find a suitable property to buy or that by the time they do prices may have moved beyond their budgets”.

He called for measures “that tackle severe planning impediments, the tax take on buying a home where mortgage holders borrow money and pay interest rates on those borrowings for the lifetime of the mortgage to cover upfront VAT charges before they get a key to their homes. Mortgage lending rules also need to be relaxed to assist those on average incomes.”