The Society of Chartered Surveyors Ireland (SCSI) expects property prices to increase by 3% during the third quarter of 2022 and 4% over the next year as inflation in the market slows following the post-pandemic surge.
Annual rates of inflation of 14-15% seen in recent months were not sustainable in the long term, according to SCSI Practice & Policy Committee chair John O'Sullivan, adding that the 4% forecast needed to viewed in context near-record levels of inflation in the wider economy.
"Right now the current rate of consumer price inflation is circa 8% which means that compared to consumer prices, the projected increase is actually a reduction of 4% in real terms," O'Sullivan said.
"While it’s not surprising that the number of agents citing economic factors as the key drivers of inflation has almost doubled – from 13% to 25% -- the vast majority of agents still believe that ow levels of supply will continue to underpin prices in the near term.”
In addition to inflation, O'Sullivan cited rising interest rates supply chain issues, geopolitical uncertainty caused by the war in Ukraine and continued sluggish supply of new housing, with just 24,500 new homes expected by the Central Bank to be completed in 2022, increasing to 29,000 in 2023 and 33,000 in 2024.
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"This is a reduction of approximately 3,500 units compared with their previous forecast for the same period," O'Sullivan continued.
"With a population now in excess of 5 million for the first time since 1841, a trend towards smaller average household size, current positive net migration, plus commitments to provide accommodation to incoming refugees from Ukraine, it's clear the need to unlock additional housing supply remains acute.”
“While lack of supply is still the dominant issue there are some signs the situation has improved slightly. While 85% of agents reported low levels of stock for sale at the end of 2021, this dropped to 77% in the latest survey," he added.
"Due to the continuing rise in ‘Working from Home’ post Covid, many buyers are continuing to consider properties outside of the larger urban centres as long as they have a good broadband connection."
The SCSI Residential Property Price Monitor survey received 130 responses from members giving their expectations of the property market.
The study included three affordability scenarios, in Cork, Kildare and Meath, for a couple with a combined gross annual income of €89,000.
The couple in question would be able to purchase an average new three-bedroom semi in Co Meath for €340,000 with a €34,000 deposit and a mortgage loan limit of €312,000, but the same couple would be €30,000 and €64,000 short of the same property in Cork (€380,000) and Kildare (€418,000), respectively, under Central Bank lending restrictions.
"These figures show that buying an affordable property remains out of reach for thousands of Irish people on average salaries looking to buy their first home. Of course, you are also going to have thousands of people on salaries below this level," O'Sullivan said.
"Unfortunately, with construction costs continuing to spiral and interest rate increases on the way it looks as if the situation facing first time buyers is set to become even more challenging. From a homebuilder’s perspective, if people can’t afford new homes that raises questions over their viability and overall housing supply.”
While the government has no control over global supply chain issue, O'Sullivan said policymakers had room for manoeuvre on planning, procurement, utility connection charges, VAT and development contributions that make up around half the cost of delivering a new home.
In the rental sector, 88% of respondents believe stock lost to the sales market will not be replaced in the next two years, with agents arguing that landlords are leaving the rental market due to the complexity of rental legislation and regulations.
(Pic: Getty Images)
