26 Jun 2022

Longford Leader property: Lack of supply to continue to drive up house prices

Longford House Prices

A lack of suitable housing stock is continuing to drive up house prices

Eighty six percent of SCSI estate agents expect national property prices to increase by an average of 6% over the next 12 months while a similar number say the main reason for the increase is due to lack of supply.

These are among the key findings of a survey of over 200 estate agents from all over the country which also revealed a marked regional variation with regard to future price movements.

While agents in Munster and Connacht/Ulster expect prices to increase by 7% over the next 12 months, the figure in Leinster is 6% while in Dublin, where prices are highest, its 4%.

In cash terms a 7% increase on a €200,000 home outside of Dublin will equate to an increase of €14,000 while a 4% increase on a €400,000 home in Dublin will mean an increase of €16,000.

Agents said the higher price forecast for properties outside Dublin reflected the covid effect and the increased attractiveness of regional properties due to the dramatic rise in people working from home.

Despite covid, eight out of ten respondents reported an increase in enquiries and viewings over the last quarter.

The SCSI/Central Bank of Ireland Residential Property Price Survey is a quarterly sentiment survey of SCSI members, consisting mainly of estate agents, auctioneers and surveyors.

TJ Cronin, the President of the SCSI said lack of supply, construction lockdowns and steep increases in the price of materials meant prices would continue to rise.

“We had a supply crisis pre-covid and that has simply deepened due to covid. While 45% of respondents in the survey reported a fall in selling instructions in Q2 2021, 81% reported an increase in enquiries. In addition, eight out of ten agents are reporting low stock levels. And that’s why so many agents were seeing a consistent increase in enquiries even during the highest levels of covid.”

“While prospective sellers were reluctant to put their property on the market, buyers, who in many cases were in a position to increase their savings, were left chasing a reducing number of properties. While it’s a sellers’ market right now, the rate of price increases we are seeing currently is not sustainable in the long term. Agents believe the only way to address the affordability challenge which purchasers are facing is to increase housing supply.”

“Over the last 16 months the construction sector was closed down several times and the cumulative impact of the slowdown on new home construction will be with us until 2023 at least. Significant increases in the price of steel, timber, plastic and insulation products – due to supply chain and transportation issues - and labour shortages across a number of trades will also lead to higher prices for new homes.”

“Forty six percent of respondents reported an increase in Buy to Let properties coming on the market while 41% said it remained the same. The vast majority of agents said the main reason landlords were selling up was due to the low returns and complexities associated with rental properties. The SCSI has been concerned about this trend for some time as it has serious implications for the stock of rental properties and indeed the future of the rental market in this country.”

Housing Supply

Turning to the wider housing supply situation the CEO of the SCSI Shirley Coulter said the covid crisis had deepened the housing crisis and extraordinary measures were now needed to address it.

“We believe 400,000 new homes – social, affordable and private builds - will need to be built over the next ten years to meet pent up demand and the needs of our growing population. Current output is around 20,000 units so a doubling of that will require a massive increase in funding and collaboration between the private and public sector.”

“That is why we support the ESRI’s recent recommendation to Government to double its current investment in housing by borrowing between €4bn and €7bn a year while availing of low interest rates. The ESRI estimates that if the state doubled its spend on housing from €2bn to €4bn it could deliver 18,000 units a year. That is what we need to help get us up to 40,000 units per annum.”

“Housing takes time and that is why it is so important to eliminate avoidable and costly delays from the planning process. The ending of the Strategic Housing Development planning application model provides an opportunity for planning reform especially with regard to judicial reviews; it goes without saying that the right to legal redress must be protected however other mechanisms to facilitate appeals in a more efficient and cost-effective manner are vital to ensure both the viability of development for builders and housing that is affordable for purchasers” she concluded.

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