Most consumers expect house prices to keep rising for three years

KBC Bank survey suggests consumers expect upward trend to continue

The State’s housing market continues to be stoked by pandemic-related factors. Photograph: Frank Miller

The State’s housing market continues to be stoked by pandemic-related factors. Photograph: Frank Miller

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Seventy per cent of Irish consumers expect house prices to rise by at least 4 per cent per annum over the next three years, according to a survey by KBC Bank Ireland.

The State’s housing market continues to be stoked by pandemic-related factors such as increased savings and lower-than-anticipated supply. Prices rose at an annual rate of 6.9 per cent in June, the fastest rate of growth recorded in 2½ years.

KBC’s survey suggests consumers here are expecting the current upward trend in values to persist for at least another three years.

Higher expectations of property price increases were slightly more evident in Connacht, Ulster and the Border region, probably reflecting comparatively strong recent price trends in these areas, the study found.

While consumers in Dublin expected price increases, most expected somewhat smaller increases and more consumers in the capital envisaged price declines.

The most common expectation nationally was that prices would rise by 4-5 per cent.

There were also differences in expectations between age groups. Younger cohorts, particularly those in the 25-34 age group, were less likely to expect property prices to increase than their older counterparts. Higher-income groups were also more likely to expect property price gains.

Buyer demand

KBC Bank Ireland chief economist Austin Hughes said the findings suggested home-buyer demand would be likely to remain “well underpinned” in the year ahead.

“It may also hint that the balance of risks in terms of property price inflation could be clearly weighted towards the upside,” he said.

“In turn, this might suggest the thrust of upcoming housing market policy interventions should be to calm rather than create additional demand,” he said.

“In this context, it should be noted that measures that credibly boost future supply should serve to calm demand but measures that materially augment purchasing power are likely to act in the opposite direction,” Mr Hughes said.

Several groups have criticised the Government’s new shared-equity housing scheme, believing that it could be inflationary.

The initiative, aimed at boosting home ownership, would see the State taking a stake of up to 20 per cent in the purchase of a new home in a bid to bridge the affordability gap.

“It may say something about the roller-coaster nature of the Irish property market that only 5 per cent of consumers see prices being broadly flat over the next three years,” Mr Hughes said.

“The recent accelerating trend in Irish house price inflation, that pushed the annual rate of increase to a 31-month high of 6.9 per cent in June 2020, gives a strong sense of the heat being generated in the Irish residential property market at present,” he said.

“Unfortunately, this hasn’t translated into any significant light as to when or how the market might move on to a path that might be described as sustainable in terms of the speed of price increases or satisfactory in terms of the scale of housing activity adequate to meet the Irish economy’s dynamic and diverse accommodation needs.”