House prices globally are being fuelled by pandemic-related factors such as remote working and increased savings but also by local factors. In the case of the US, a massive fiscal stimulus; in the case of the UK, stamp duty cuts; in the case of New Zealand, the temporary suspension of macroprudential rules. Chronic undersupply is probably the key variant here. The expectation is that these factors will drive house prices between 5 and 8 percentage points higher this year.
The latest property price numbers from the Central Statistics Office, published last week, appear to support these forecasts, as prices nationally rose at an annual rate of 6.9 per cent in June. Price trends in the residential market, however, can change at the drop of a hat. We've seen that over the past 20 years.
And already in the UK the scaling back of tax breaks for would-be buyers has seemingly – it’s probably too early to be sure – triggered a turn in the market. According to property website Rightmove, UK house prices fell in August for the first time this year amid a drop in demand for bigger homes after the government began winding down its stamp duty tax break for buyers.
Rightmove said the national average asking price of a home had fallen by 0.3 per cent, or about £1,000 (€1,176), over the past month, and now stood at £337,371, while noting that buyer demand remained strong for smaller properties in particular. With supply coming on here after an initial four-month hiatus at the start of 2021 and the State’s vaccination programme now outstripping the UK’s, it’s possible the Covid bounce may start to come unstuck before the year is out.
Prior to Covid, annual house price inflation fell from more than 13 per cent in 2018 to just 0.2 per cent in 2020 and to minus 0.9 per cent in Dublin. And remember this slowdown in price growth came despite the supply shortages.
