House prices ‘set to rise’ despite slowdown in market

Pressure on home prices will continue until there is ‘a substantial increase in supply’, says BPFI

Pressure on home prices will continue until there is ‘a substantial increase in supply’, says BPFI

There will be little let-up in house prices for the foreseeable future, a major lobby group warned, as structural issues are set to keep pushing demand for homes higher despite the recent slowdown in the property market.

While soaring inflation and the economic downturn have seen house price growth slow in recent months, that is unlikely to continue for the long term given the ongoing shortage of houses and runaway rents incentivising people to own their own home, Banking & Payments Federation Ireland (BPFI) said in a report on Tuesday.

“The significant gap which now exists between average rents and mortgage payments coupled with significant latent demand are likely to balance any negative impact on demand for mortgage lending in the short term which will likely continue to impact house prices unless we see a substantial increase in supply,” BPFI chief executive Brian Hayes said.

The report comes despite recent data suggesting the residential market is slowing. House prices are about 7 per cent overvalued, think tank the Economic and Social Research Institute said in October. Prices for second-hand homes rose 5.5 per cent in the third quarter of this year, down from 7.1 per cent a year earlier, according to estate agent Sherry FitzGerald. Annual price increases slowed to 10.8 per cent in September from 14 per cent in June, according to the Central Statistics Office.


The BPFI, which is the main industry group for the banking sector, also pointed to the slowdown in new home building, as developers grapple with rising input costs, as reason to expect demand to continue to outstrip supply. Construction started on 6,770 new homes in the three months to the end of September, down 22 per cent compared with a year ago, the group said.

The report points to the disparity between rent and mortgage repayments which shows little sign of abating. First-time buyers pay about €1,000 per month in repayments, the BPFI said, compared with an average €1,400 monthly bill for renters.

While house prices have increased only slightly ahead of the EU average in recent years, typical rents in Ireland have jumped 82 per cent since 2010, according to EU data. That compares with about 18 per cent across the bloc.

Mortgage data has indicated the market is slowing with yearly approvals hitting the lowest level in 17 months in October. Still, the BPFI says that is unlikely to continue.

“While in the short-term mortgage demand may be impacted by the cost-of-living crisis and general economic uncertainty, this may well be offset by factors such as pent-up demand and high rental costs which will sustain home buying demand into the future resulting in price pressures, albeit at a lower level, unless supply increases substantially,” Mr Hayes said.

As the housing crisis continues, the Dublin Regional Homeless Executive (DRHE) said it expects there will be enough emergency accommodation beds in the capital to meet demand this week as temperatures are forecast to drop to -6 degrees.

Met Éireann has issued a weather advisory until December 12th, with “very cold” weather expected from Wednesday night.

Mary Hayes, director of the DRHE, said the executive activated its cold weather strategy, and there “will be a bed for everyone who wants one”.

Ms Hayes said workers in Dublin Simon are out on the streets every day who will help alert homeless individuals that there are beds available for them.

Peter Flanagan

Peter Flanagan

Peter Flanagan is an Assistant Business Editor at The Irish Times