A year of resilient demand and moderating price inflation

 

Sherry FitzGerald, Ireland’s largest estate agent, reported today (Saturday December 31st, 2022) that the average value of second-hand homes in Ireland increased by 5.7% in 2022. This is a notable slowdown on the growth of 9.6% recorded in 2021, as the market recovered from the effects of COVID-19 restrictions.

 

In Dublin, values grew 5.2% in the year, compared to 7.2% in 2021. Price growth continues to be stronger outside of Dublin, with average values nationally excluding Dublin rising 6.4% in 2022.

 

Commenting on the moderation in price inflation in 2022, Marian Finnegan Managing Director noted, “Following the above trend price inflation in the post Covid era, 2022 saw a return to more moderate price growth, with average values growing by just under 6% compared to almost 10% in the previous year. This trend is expected to continue into 2023 with overall prices anticipated to increase by less than 3% in the year ahead.  Furthermore, the binding nature of the macroprudential rules over the past number of years has kept price inflation at more moderate levels in the capital, where average values are higher. For a variety of reasons including the easing of the rules for first-time buyers, we expect to see a convergence in the levels of price inflation in Dublin and nationally.”

 

Sales activity remains healthy, with volumes ahead of 2021 and above pre-COVID-19 levels also. In the first three quarters of 2022[i], there were approximately 41,940 sales recorded on the property price register (PPR), excluding block sales and new homes acquired for social housing. This represented a 7.3% jump on the first nine months of 2021, and a 7.6% increase on the comparable period in 2019.

 

A noticeable trend in this data is the increased volumes of new homes sales.  New homes sales nationally increased 35.1% on the same period in 2021, and a 16.8% increase on 2019, as developments which were previously delayed due to COVID-19 related public health restrictions were completed and sold in the year. That said, the latest data on supply reveals a more worrying trend with the number of planning permissions granted in the third quarter of 2022 down 43% year on year.  Commencements have also slowed, with the latest data from October showing that residential housing starts are down 31% on 2021.

 

The second-hand market remains robust with sales 4.1% stronger than 2021 and activity up 8.1% compared to 2019.

 

Owner occupiers remained the most active purchasing cohort in the market in 2022. They represented 79% of all second-hand home purchases made through Sherry FitzGerald in the year, with first time buyers comprising over 40% of all owner occupiers.

 

Unfortunately, as has been the trend for over a decade, the exodus of landlords from the rental market continued unabated in the year with just 13% of purchases made by investors. Comparatively, 36% of all sales were investors selling their properties, signalling a huge disparity between those entering and exiting the market.

 

In conclusion, Marian Finnegan, Managing Director, Sherry FitzGerald said; “After two turbulent years, hopes were high that 2022 would see a return to normality.  Unfortunately, it was not to be.  The war in Ukraine and the associated economic challenges have all created increased uncertainty.  That said, demand for all categories of property remained quite robust in 2022, with transaction volumes, surpassing their pre-pandemic levels.  Further growth to over 60,000 transactions is expected for 2023, with particularly robust activity in rural and coastal areas.

 

For property, the most direct impact of uncertainty was on construction.  While house completions are expected to exceed 26,000 this year, the anticipated V-shaped recovery in supply is now less likely. As such, a significant supply deficit will persist. 

 

After above trend price inflation in the post Covid era, 2022 saw a return to more moderate price growth with prices expected to grow by 2-3% in the year ahead.  Finally, the rental sector remains crippled by historically low supply, with enduring high levels of rental inflation.”