Little respite for Irish Homebuyers

This quarter’s MyHome report shows asking price inflation of 9% in Q3 2021, down from 13% in June. However, this will provide little respite for homebuyers. We always expected the annual rate to slow in Q3, as the 5% rebound in asking prices in the summer of 2020 fell out of the annual comparison. The bigger picture is that the market is still starved of supply with prices being bid-up aggressively by homebuyers.

This behaviour is evident in transactions being settled well above transaction prices. For a limited pool of 450 properties sold during the summer, we have calculated the transaction price was 6.5% higher than the asking price, compared with a premium of 2.7% in Q2 2021. Hence, we now expect Irish residential property price inflation of 10% through 2021 (vs 8% previously) and slightly faster than the 9% asking price inflation we have seen to September.

Unfortunately, there has been only a marginal improvement in housing market conditions for homebuyers. There are currently 13,500 properties listed for sale on MyHome, up only slightly from 12,700 in Q2 2021 and still well down on circa 20,000 prepandemic.

Although new listings have recovered through 2021, the underlying picture is that vendors have only gradually returned to the market – whereas demand has remained robust.

Robust demand for housing is evident in the residential transactions. The Property Price Register shows that €12.9bn, or 36,500 residential transactions so far in 2021, which is up 35% on 2020. Effectively residential market activity has returned to prepandemic levels, albeit with the lack of housing supply appearing to hold back transactions in recent months.

The excess demand in the housing market is particularly evident in the mortgage lending data. In the twelve months to June 2021 mortgage approvals equaled 42,600 – a fresh cyclical high. However, there just 31,300 mortgages drawn down over the same period. This implies in excess of 25% of would-be homebuyers with mortgage approval are now failing to secure a property.

On a brighter note, homebuilding has beaten dour expectations and looks to be recovering quicky following the 3rd lockdown. Remarkably, housing starts equaled 16,000 in the four months April-July 2021, starts in the twelve months to July 2021 to 29,000 – again a fresh cyclical high and the highest total since September 2008.

However, given population growth is adding 30,000 units at a minimum each year, coupled with circa 100,000 units of latent demand built up over the past decade, it will take some time before homebuilding can start to address the housing shortage.

For more information on the residential property market, download a full version of the Q3 2021 myHome report.