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House prices rose 6 percent last year, the fastest growth rate in nearly three years, according to a report by real estate website MyHome.ie, which warned that “too much cash is chasing too few homes.”
Experts had expected property values to decline in 2020 amid massive unemployment and a pause in economic activity brought on by the pandemic.
However, the market has defied expectations with stronger prices and an increase in mortgage loans.
The latest MyHome.ie report, compiled in conjunction with Davy Stockbrokers, found that annual nationwide selling price inflation rose 6.3 percent in the fourth quarter of last year and 4.8 percent in Dublin.
This raised the average sale price of a house in the state to 284,000 euros. In Dublin, which has the greatest supply shortage, the average selling price was € 392,000, while outside Dublin it was € 238,000.
“This trend confounds warnings made in early 2020 that the Irish housing market could experience double-digit price declines,” the report stated.
The acceleration in prices was attributed to several factors, including the fact that many potential home buyers were insulated from Covid-19-related job losses.
The report also noted that government support had protected revenues, eliminating the risk of forced sale, while housing supply problems had become “more acute.”
He also noted that mortgage loans had reached a “new cycle high” of 1.1 billion euros in October.
MyHome.ie, which is owned by The Irish Times, bases its findings on recently listed properties, which it says are the most reliable indicator of future price trends.
Increase ‘probable’
The report’s author, Davy Conall Mac Coille’s chief economist, said house prices are now likely to rise in 2021.
“This quarter’s MyHome report points to an acceleration in annual asking price inflation to 6 percent, the fastest pace in nearly three years,” he said.
“This pressure has not yet increased on transaction prices, although the Central Statistical Office’s Residential Property Price Index rose 0.5 percent in October, the steepest monthly increase in more than a year. It’s probably only a matter of time before the official measure of house price inflation accelerates.
“As we approach 2021, home buyers have saved additional funds to purchase homes, and confidence is bolstered by the likely recovery in the economy as vaccines are disbursed,” Mac Coille said. “As home construction will continue to deteriorate, with banks looking for loan opportunities, too much cash is chasing too few homes, which can only drive prices up.”
The pandemic has caused a sudden increase in savings, and households have deposited an additional 12.6 billion euros in bank and credit union accounts. Some of this is expected to flow back into property-related transactions.
Angela Keegan, CEO of MyHome.ie, said: “The housing market reflects the broader economy, and we are in a much better place now than we could have expected in early 2020 when the virus emerged.
“The government’s support for Covid-19, the rise in mortgage loans, and the concentration of job losses among mostly lower-wage workers have ensured that the housing market remains optimistic, while the problem Current supply has exacerbated demand and caused an increase in house price inflation. “
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