A change in homebuyer behaviour may be contributing to a slowdown in property sales, according to KBC Bank.
The bank’s chief economist, Austin Hughes, said buyers increasingly want to “future-proof” their home purchases because of the inherent dysfunction of the market.
This was causing a divergence between underlying demand – those interested in buying a home – and effective demand – those now ready and able to buy a home at current prices, he said.
Property price inflation has slowed sharply in recent months, while prices in Dublin, where demand is strongest, are actually falling.
"In the past people were just willing to get anywhere on the property ladder regardless of circumstance, with a view to moving in two or three years," Mr Hughes said.
“Partly because the property market has been so completely dysfunctional, people are now saying this isn’t a market I want to enter on a regular basis”, and this is leading to a delay in purchasing.
KBC’s latest homebuyer survey found purchasers were planning to live longer in the homes they buy, with two-thirds intending to live there for more than 10 years.
“As they attempt to future-proof their homes for potential future changes in their personal circumstances, the property search is almost inevitably taking longer,” Mr Hughes said.
Compromise
The survey also suggested fewer people than in previous surveys said they would have to compromise in relation to the size or type of home they buy.
“With fewer citing a shortage of homes on the market at present, it might be expected that the timeframe for homebuying would be falling,” Mr Hughes said. “However, the opposite is the case. With almost half of buyers [44 per cent] saying that property prices are not rising in the market segment of interest to them, it doesn’t appear that affordability adequately explains this anticipated slower purchase path.” .
The survey found that 53 per cent of those now considering purchasing a property are first-time buyers, 33 per cent are “movers”, while 15 per cent classified themselves as investors.
“Effective demand appears to be slowing,” Mr Hughes said, suggesting another indication of the widening gap between underlying demand and effective demand is that homebuyers think it will take them significantly longer to complete their property purchase, the survey found.
Delay
The survey found nearly 80 per cent of homebuyers think they will not purchase when they originally planned, with 38 per cent of them envisaging a delay of more than a year.
Mr Hughes said affordability and uncertainty were two influences that might contribute to a widening gap between underlying and effective demand at present.
“The details of the homebuyer survey also hint that changing purchasers’ preferences could also be an important factor affecting home sales at present, though these changing priorities of homebuyers may be partly driven by issues such as affordability and uncertainty that make them less inclined to make repeated property moves,” Mr Hughes said.
