Despite Covid-19, chartered agents expect residential property prices to increase by average of 4% in 2021
The main findings:
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2 out of 3 chartered agents expect property prices to increase in next 12 months
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Price increases are forecast to range from 3% in Dublin to 6% in Connacht Ulster
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SCSI agents say price expectations are underpinned by lack of supply and economic performance
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Increase in home working is driving higher interest and prices in regions
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Lack of supply a major issue, 83% of chartered agents reporting low levels of stock
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Market weathered Covid storm in 2020 with stop, start, surge of property activity
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While 77% of SCSI agents expected property values to decrease in Q1 2020, this fell to just 8% in Q4
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Supply the dominant issue as Society warns it could be another decade before housing demands of growing population are met
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Rent legislation is cited as main reason investors are leaving rental market
While the property market was dominated by Covid-19 in 2020, residential property prices proved surprisingly resilient throughout the year and are set to increase by an average of 4% in 2021 according to the Society of Chartered Surveyors Ireland.
Chartered estate agents believe property prices in Dublin – which has the highest prices - are set to rise by 3%, while Connacht Ulster which has some of the lowest prices, will see an increase of 6%.
An increase of 4% is predicted for Leinster while prices are forecast to increase by 5% in Munster.
This year’s SCSI annual Residential and Outlook report – which has been running since 1983 - is based on four surveys of almost 800 members conducted during the four quarters of 2020.
According to the findings, over two thirds of chartered agents (68%) expect to see an increase in property values over the coming 12 months, 24% expect values to remain the same while just 8% expect them to fall.
The Vice President of the SCSI, TJ Cronin said that while the lack of supply would continue to underpin these price expectations in the short term, chartered agents were struggling to meet the demand for property, especially from first time buyers.
“2020 was dominated by Covid-19 and this led to a stop, start, surge property market which only began to taper towards the end of the year. Agents believe Covid-19 will once again dictate activity levels in 2021 and given the recent introduction of new restrictions it’s very possible we could see a repeat of that stop, start, surge pattern in 2021.”
“Sixty two percent of the chartered agents and auctioneers who are predicting prices will rise, say it is because of the lack of supply of new and second-hand homes while 33% say economic performance and the impact of Covid-19 on output will be the key drivers”
“We can see that the transition to working from home has led to a reordering of priorities and is driving interest in larger properties in regional locations with good broadband and lots of amenities as well as holiday homes in secondary locations. The trend away from urban areas is also reflected in the survey’s price projections, with agents in Dublin forecasting the lowest growth and agents in Connacht/Ulster the highest.”
“While Covid-19 has badly affected certain sectors, it has enabled prospective buyers who work in areas which haven’t been hugely impacted, such as pharma, tech, financial and the public sector, to increase their savings. We’ve also seen a big inflow of Irish people returning from abroad, to Dublin in particular, and this has underpinned prices at the upper end of the market. In a situation where you have very limited supply – 83% of agents report having low levels of stock available in Q4 – the fear of missing out on a property will very often trump the fear of paying over the odds” Cronin said.
Supply
The report’s findings underlined the scale of the supply side challenges facing the market and indeed the country.
Although 76% of agents reported sales instructions increasing or remaining the same in Q3, by Q4, this figure had dropped to 55% with 45% of agents actually reporting a decrease. Several agents said the slowdown in instructions was ultimately due to lack of supply with potential vendors deferring selling due to the lack of alternative options.
With the construction sector projected not to return to 2019 levels of new completions until 2024 (Ernst & Young Report) the SCSI says housing supply and demand equilibrium may not be achieved until 2031. By that stage it’s predicted the sector will need to be building in excess of 60,000 units per annum, over three times the current output.
Cronin says that while the property market has weathered the Covid storm in the short term, issues which had existed pre-Covid had not gone away.
“Many of the people who have been worse affected from an economic perspective by the pandemic are very often excluded from the property market on affordability grounds. That is an indictment of the failed housing policies of the past. The Society has called on the Government to embark on a major house building programme so as to ensure the needs of our growing population are met and that we have a sustainable property market for the future.”
The Rental Market
While figures from the RTB show that rental prices have shown the lowest national annual growth rate since late 2012, agents believe the alleviation of supply - due to several thousand short-term lettings previously marketed at tourists coming on the market – is likely to be a one-off occurrence.
Thirty nine percent of respondents expect to see an increase in the number of buy-to-let properties (BTL) coming onto the market this year while 42% expect the number to remain the same and 19% expecting to see a decrease.
The sale of BTL properties to owner-occupiers has been commonly cited by agents as a major reason for the continued lack of rental supply. When asked what the main reasons was for BTL properties coming on the market, most agents said it was due to rent legislation which is too complex and restrictive. Other reasons included landlords coming out of negative equity and low returns.
The SCSI’s Annual Residential Property Review and Outlook Report 2021 is available at www.scsi.ie or on request.
Article Published: 18/01/2021