Estate agents expect national property prices to increase by an average of 6 per cent over the next 12 months, with a majority attributing the swelling prices to a lack of housing supply.
More than 200 estate agents belonging to the Society of Chartered Surveyors Ireland (SCSI) were asked for their opinion on future price trends for its July residential property market monitor report.
“We had a supply crisis pre-Covid and that has simply deepened due to Covid,” said SCSI president TJ Cronin.
The survey of SCSI estate agents revealed some regional variation in the expected price movements.
Agents in Munster and Connacht/Ulster expect prices to increase 7 per cent over the next 12 months, with the figure in Leinster as a whole standing at 6 per cent. But in Dublin, the predicted rise is 4 per cent.
A 7 per cent increase would see a €200,000 home outside Dublin rise to €214,000, while a €400,000 Dublin home rising 4 per cent would have a new price of €416,000.
Agents said the higher price forecast for housing outside Dublin reflected the effect of Covid-19 on the market as more people have been given the option to work from home.
Eight out of 10 respondents reported a rise in enquiries and viewings in the second quarter, but a similar proportion is reporting low stock levels, Mr Cronin said. Almost half of estate agents saw a fall in selling instructions in the second quarter, the survey found.
“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,” he said.
“Agents believe the only way to address the affordability challenge which purchasers are facing is to increase housing supply.”
Last week, the Revenue Commissioners said it would take the “quite exceptional market conditions” into account when guiding homeowners how to value their properties for the purposes of local property tax (LPT) when new valuations are required in November.
The Revenue said it would not be “over-relying” on recent prices, acknowledging that some areas of the country have seen sharp inflation in selling prices as a result of the squeeze on supply exacerbated by the pandemic.
Mr Cronin said the cumulative impact of the slowdown on new home construction from the repeated shutdowns of the sector “will be with us until 2023 at least”, with increases in the price of steel, timber, plastic and insulation products also contributing to higher prices for new homes.
His remarks come as a snapshot of the construction sector provided by Ulster Bank’s purchasing managers’ index (PMI) showed a further recovery for housing activity in June as sites reopen, but flagged concerns about the rising cost of building materials, led by steel.
SCSI chief executive Shirley Coulter said extraordinary measures were now needed to address how Covid-19 has affected housing.
“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,” she said.
The SCSI supports the ESRI’s recent that the Government double its current investment in housing by borrowing between €4 billion and €7 billion a year, while availing of low interest rates.
“Housing takes time and that is why it is so important to eliminate avoidable and costly delays from the planning process,” Ms Coulter added.