Is the Covid property bump just a blip?

Cantillon: Market continues to defy expectations but this is unlikely to last

Property is one of the few sectors than seems to have shrugged off the pandemic. Okay, there was a fall-off in transactions last year linked to the fact that people couldn’t get out to view properties because of the restrictions.

But property values have increased – they rose by 2.2 per cent last year and by 2.6 per cent in the 12 months to the end of January – instead of declining as many predicted when the pandemic first hit. It’s hard to pinpoint why. When unemployment goes up, property sales and values should go down.

Property is an increasingly exclusive game – only people on relatively big incomes can afford to buy – and speculation is a huge factor, so the basic laws of supply and demand don’t necessarily follow.

Stimulus packages

A number of factors might be behind the current bump in prices – increased savings, a reassessment of living arrangements because of the pandemic, remote working, even ex-pats returning from London after Brexit has been cited as a reason.


The big question is whether this is merely a temporary phenomenon, or one that will be quickly overtaken? There are strong indicators that the Covid bounce is already wearing thin in the UK and elsewhere. Analysts say much of the current froth may be linked to the massive stimulus packages underpinning most of the economies in Europe.

When these are removed, a different dynamic may arrive. Estate agents insist the current demand/supply dynamic here – in other words the lack of supply – will lead to further price growth.

Market trends

Most are predicting price increases of 2-5 per cent this year. But they’ve never been good at detecting medium-term trends in the market and prices in Dublin had been falling up until recently despite the dearth of supply.

The Government’s Help to Buy measure and its proposed shared equity scheme will encourage prices forward by egging on demand, but it’s not obvious who that benefits. The safest thing to assume is that we’ll still be in the midst of housing crisis this time next year regardless of which way prices move.