Irish property price growth lags international trends

Republic ranks 48th out off 55 countries in table topped by Turkey and New Zealand

New Zealand prime minister Jacinda Ardern is concerned about rapid price growth in her country. Photograph: Marty Melville/AFP

New Zealand prime minister Jacinda Ardern is concerned about rapid price growth in her country. Photograph: Marty Melville/AFP

 

Irish property price growth lagged international trends in 2020, with the State’s rate of inflation ranking it 48th out of 55 countries according to a new report.

Despite the pandemic, global property prices rose by 5.6 per cent, with double-digit growth in Turkey, New Zealand and the US, on the back of poor supply and low interest rates.

In Ireland, prices rose by 2.2 per cent in the year to December 2020, and by 1.8 per cent in the last three months of the year. Growth was stronger outside the capital, with price growth of 3.1 per cent, compared to 1.2 per cent in Dublin, according to figures from the Central Statistics Office.

Such modest growth means that Ireland was bottom of the performance table, at 45th out of 55 countries in a report on global prices from Knight Frank.

Fastest-growing

The Republic has languished at the bottom of the table for some time now. Last year, it placed 48th. However, this follows some years of double-digit growth. Back in 2014, for example, Irish property prices were the fastest-growing across the world according to this survey, with annual growth of some 16.3 per cent.

Now Ireland is one of the countries with a more modest growth rate in Europe, behind Austria (10 per cent), the UK (9 per cent), Germany (8 per cent) and France (6 per cent), but ahead of Italy (1 per cent) and Spain (-2 per cent).

Globally, house prices are rising at their fastest rate in nearly three years, advancing by 5.6 per cent on average in 2020, up from 5.3 per cent in 2019.

Across the 55 countries surveyed, 89 per cent saw price increases in 2020. Turkey saw the strongest growth, of 30.3 per cent in 2020.

Rapid price growth in New Zealand has concerned the Jacinda Arden government so much that it has tasked the country’s central bank with considering the impact its monetary and financial policy decisions have on housing prices. It’s the first such move anywhere in the world.

Interest rates

According to Knight Frank, low interest rates are fuelling demand while inventory levels are tight in some markets with sellers reluctant to market their property until they can identify their next home. Indeed, supply in the Irish market is at a 14-year low.

With travel bans in place, Knight Frank says demand is coming from domestic buyers who have reassessed their lifestyles since the pandemic hit, with many now seeking home offices and outdoor space.

Looking ahead, the report suggests that prices may weaken globally, as the impact of the pandemic begins to unwind, and it may depend on the speed with which the vaccine is rolled out and economies reopen.

“As policymakers step away from stimulus measures leaving jobs and mortgages less protected we may see prices weaken, but the easing of travel bans may see cross-border transactions start to recover, mitigating some of this impact.”