Estate agent Sherry Fitzgerald warned on Monday that there is “increasing evidence of a market in crisis” as supply of property for sale slumps to a record low, investors depart the market in droves and transaction levels remain muted.
Reporting its House Price Index for the first quarter of 2016, the estate agent said that the average value of residential property in Ireland rose by 1.3 per cent in the first quarter of 2016, bringing growth in the twelve months to the of end March to 3.5 per cent.
The average value of residential property in Dublin rose by a moderate 0.7 per cent in the first quarter of 2016, up by 1.2 per cent in the twelve months to end March.
Growth was stronger outside Dublin than in the capital, as the quarterly national growth figure excluding Dublin was 2 per cent, or 6.8 per cent on an annual basis. Growth was particularly strong in Cork, as prices rose by 2.5 per cent in the quarter, and by 8.8 per cent in the year to end March. The CSO Residential Property Price Index has higher annual growth figures, as this is based on mortgages drawn down in a particular period, Sherry Fitzgerald said.
However, Marian Finnegan, chief economist with Sherry FitzGerald, said that the figures "mask the true dysfunctional nature of the market," and warned that the crisis "will only get worse", as she pointed to a number of market factors.
Slump in supply
Firstly, the stock of property available to sell has fallen to the lowest point on record, Ms Finnegan said, noting that just 1.4 per cent of the private housing stock was for sale in January, down by 13 per cent on January 2015. In Dublin, just 0.8 per cent of the private housing stock is on the market, while supply is also “incredibly low” in other regional centres. A report from Daft.ie on Monday found similar problems with supply, noting that the number of homes for sale is at its lowest level in nine years.
Secondly, there is a continued mismatch between the quantity of private investors entering and leaving the market, with a study from Sherry FitzGerald showed that as many as 46 per cent of all sales in the first quarter of 2016 were investors off-loading their investment properties. In contrast only 19 per cent of all properties were purchased by investors.
“This trend suggests that for every one private investor who has bought in the market during the year to date, two have exited the market,” Ms Finnegan said, adding that it was having “a debilitating impact on the rental sector.”
And thirdly, the volume of property transaction slowed notably during the calendar year 2015, with activity up by a “modest 10%” on 2014.
Cash buyers remain strong, with figures suggesting that cash-buyers accounted for 46 per cent of all residential transactions in 2015.