Irish House Price Report Q1 2022 | Daft.ie

Daft Reports

28th Mar 2022

Second-hand market still in recovery mode

The figures in this latest Daft.ie House Price Report confirm that strong upward pressure in prices appears to be steady. Nationally, prices rose 8.4% in the year to March ‐ in line with the inflation rate of 8.1% seen in the year to December. As before, there is a gap between the increases seen in Dublin (4%) and the other cities (5% on average) and elsewhere in the country (12.3% on average).

The stability of inflation is down to the fact that the increase seen in the first quarter of 2022 (2.4%) was very similar to that seen in the first three months of 2021 (2.2%). And therein lies the problem. Prices have increased quarter-on-quarter nationally, for seven consecutive quarters since the second quarter of 2020, when Covid19 had ‐ initially ‐ a negative effect on prices. The Daft.ie Report has been going for 64 quarters, since the start of 2006, and in all that time, there has never been a period where prices increased for seven consecutive quarters ‐ the longest streak was six (early 2006 to mid-2007).

National figures of course hide region differences ‐ but if Covid19 has done anything to the housing market in Ireland, it has been to take a shortage that was concentrated in urban areas and spread it all across the country. There has been significant commentary about the impact of Covid19 on the construction of new homes ‐ and rightly so, given the need for at least 35,000 new homes per year and realistically closer to 50,000 if we are to have, as a country, the right mix of housing to suit our needs.

In that context, it is unfortunate that Covid19 hit the construction sector just as it looked as though the number of completions would increase beyond the 20,000 threshold. Since 2019, the sector has been somewhat stuck at this level, although the expectation is that this year may see as many as 27,000 new homes built across all three main tenures: sale, market rental and social rental.

But the new-homes part of the sales market is just one component of it. The other is the second-hand market. On the face of it, this may seem unconnected to the supply-demand dynamic, as it's just housing getting 'recycled' not made. But given the 'arrival' of new households all the time, the liquidity ‐ or extent of transactions in the second-hand market ‐ is a key determinant of conditions in the sales market.

One of the eye-catching figures in this latest report is the number of homes available to buy on the 1st of March. At just 10,047, this is down over 20% year-on-year and well below the 2019 average of 17,500 ‐ let alone the 2010-2015 average of 38,000. But the stock on the market at any particular time captures both supply and demand forces: what's left on March 1st reflects both what was listed up to that point and what came off the market.

To get at supply on its own, we need to look instead at the flow of sale listings. And doing so reveals a second-hand market that is still recovering from Covid19. The figure accompanying this piece shows this incomplete recovery in the volume of second-hand supply. In Dublin, roughly 30,000 homes were listed for sale during 2019, while elsewhere in the country, the figure was just under 40,000. In the 12 months worst affected by Covid19 ‐ March 2020 to February 2021 ‐ these totals had fallen to just over 20,000 in the case of Dublin and 25,000 elsewhere.

The fall-off of almost 15,000 outside Dublin was not only bigger in absolute terms than the fall of 10,000 for the capital but also proportionately: a 36% fall compared to a fall of 32% in Dublin. That larger relative fall means that recovery of the second-hand market is a bigger task outside the capital than in it.

For that reason, even if recoveries were of a similar scale in both segments, the market outside Dublin would take longer to get back to where it was. And indeed, in the last 12 months, the volume of second-hand homes put on the market has improved in both segments, even if the speed of improvement has slowed somewhat in recent months.

In the year to February 2022, over 25,000 homes were listed for sale in Dublin, up nearly 5,000 from a year earlier, and over 31,000 were listed elsewhere in the country, up almost 6,000. But this still leaves both markets under-served with second-hand supply. Compared to the levels of supply seen in 2019, Dublin supply levels are still 17% below ‐ while elsewhere in the country, they are 21% below.