The Irish property market is headed for “a perfect storm of rising construction costs and flattening or falling house prices”, an industry expert has warned.
Lorcan Sirr, a lecturer in housing studies at Dublin’s Technological University, was responding to a report by the Economic and Social Research Institute (ESRI), suggesting that house prices were now overvalued by at least 7 %.
ESRI also warned that the market here is likely to experience a significant slowdown in the coming months due to greater inflationary pressures and higher interest rates.
What ESRI analysis shows is that “there is a greater correlation between interest rates and house price movements than supply and price movements,” said the Dr Sirr.
DNG chief executive Keith Lowe said it was interesting to note that ESRI had not suggested that because prices were overvalued, “there will be a house price correction.”
“We look at the value of the property based on supply and demand. At present, the demand is very strong for a limited real estate offer. Most of the homes we sell have multiple bidders and supply continues to lag demand,” he said.
“As ESRI correctly states in its report, the high inflation rates seen in the market since 2020 were partly Covid-related, and this level of price growth is not sustainable over the medium term,” said said Mr. Lowe.
“We also agree with ESRI that house price inflation is moderating due to factors such as increased supply, rising interest rates, impact of inflation on real incomes and the unraveling of additional savings and wealth, some of which has undoubtedly found its way into the residential real estate market over the past couple of years,” he said. Mr Lowe said he expected house price inflation to fall to 5% to 7% this year, falling to around 2% in 2023.
[ Irish property market likely to slow down with house prices overvalued by 7%, ESRI says ]
Marian Finnegan, managing director of Sherry FitzGerald, said while demand remained robust, the frenetic auction activity that was a feature of the post-pandemic period had subsided.
The average value of second-hand homes in Ireland rose by 1.1% in the third quarter of this year, with values rising by 5.5% in the first nine months of 2022. This compares to a growth of 7.1% over the same period in 2021.
She downplayed the prospect of a house price correction. “I expect this trend to persist into the fourth quarter and into 2023, but I remain confident that the overall imbalance between demand and supply will ensure price stability overall,” Ms Finnegan said. .
Ciarán Mulqueen, who operates online platform Crazy House Prices, noted that he had received messages from people “freaked out about interest rates”.
“A lot of buyers are forced out of their ‘agreed sale’ phase because their lender either gave them less in the loan offer or pulled it out altogether,” he said. Mr Mulqueen also noted that there were a remarkable number of ‘requested price cuts’ on property website MyHome.
[ Could interest rate hikes cause a property price crash in Ireland? ]
John McCartney, head of research at BNP Paribas Real Estate Ireland, said he expected price growth to decline from the current level (13% in July) to 8-10% by December, and at a lower rate than Dublin.
McCartney said the latest macroeconomic projections point to a fairly favorable economic and labor market outlook for the housing market, even allowing for a marked slowdown in the global economy and higher mortgage rates. He also noted that government measures such as the First Home Scheme and purchase assistance would support prices.
“Thus, while balancing and provided that the macroeconomic forecast is broadly correct, I expect a gradual and continued decline in house price inflation in 2023,” he said.
Pat Farrell, managing director of Irish Institutional Property (IIP), said: “Unfortunately the old duck about a definitive link between institutional investors and property price inflation continues despite the lack of hard evidence. in support of this assertion.
“ESRI’s report released today and reported in the media also does not support this claim. Rather, the report speculates on a range of four possibilities, one of which is the purchase of homes by non- The latter includes among others institutional investors, approved housing organizations and local authorities, the latter two being the most important component and the agents of the State for the acquisition of housing via the private market”, did he declare.
#real #estate #market #heading #perfect #storm #rising #costs #flattening #falling #prices
