A survey carried out for the Irish Independent by the Real Estate Alliance Group has found that agents throughout the country expect prices to rise by 6.1% on average in 2017.
And after a bumpy year for the Dublin market, agents in the capital are predicting that house price rises will outstrip the national average and grow by 6.8% over the next 12 months.
Rising rents, a lack of suitable supply and the punitive mortgage deposit rules for first and second time buyers had combined to put the Dublin property market into reverse throughout the opening months of 2016.
However, an increase in mortgage-approved buyers and the recent easing of the Central Bank’s deposit restrictions has seen first-time buyers return to viewings.
This, combined with a shortage of suitable supply, has caused prices to appreciate, and REA agents in the capital are predicting that the outlook is bright for the new year, at least in the lower end of the market.
However, there is less appreciation anticipated in the upper ends of the family home scale as serious issues around the income multiplier and the deposit rates put the brakes on many second-time buyers trading up.
Agents in the three main cities outside Dublin are optimistic about 2017, with rises of 10% predicted in Limerick and Galway, with Cork looking at a more modest 5% increase with agents in the latter two areas highlighting a lack of new developments planned for the cities.
The outlook for the commuter areas surrounding the capital is quite cautious, with counties around Dublin predicting a rise of 3.8% on average and many agents fearing that the market has hit its height under the current financial regime.
Agents in Meath are predicting just a 1.8% change next year, with some areas such as Navan and Kells forecasting that there will be no movement in the coming 12 months, thanks to a lack of new development and a shortage of suitable supply.
There was minimal growth in the final quarter of 2016 in Wicklow, however, agents are confident that the market will react positively to a series of significant upcoming new developments adjacent to the N11 including Kilcoole, Rathnew, Arklow and Wicklow Town.
Prices in Kildare were stagnant in the REA’s Q4 Average House Price Survey, and REA are predicting that the Government’s Help To Buy Scheme and the easing of the Central Bank restrictions will combine to produce a 3.5% increase in the coming year.
“The easing of the Central Bank restrictions has given the market great short-term hope, but the real problem in the property lies in supply,” said REA chairman Eamonn Spratt.
“We are bringing people into the market, but we have no long-term plan to provide the suitable housing that they need around the country.
“The fact remains that builders will not create developments unless those properties can be sold for more than €200,000.
“Until that point, unless there is state intervention on supply financing, we will not see sustainable building in areas where the average is below that point.
“It is this realisation that is causing price inflation in towns around the country, with the highest rises of all – an average of 7.4% – being predicted for the sector outside of Dublin, the commuter areas and the major cities.
“Longford, for example, grew by 41% in 2016 and prices are predicted to rise by a further 15% this year.
“However, the price of the average house in Longford town is just €78,000 and will reach €90,000 by the end of 2017 simply because the oversupply on the market has now sold and there are no new developments on the horizon.
“Double digit rises of 10% are also being predicted for the same reason in Roscommon, Monaghan, Cavan, Galway County and Kilkenny.”
The lack of building opportunity could hurt future economic development in lower-priced counties, as the example of Carrick-Shannon in Leitrim shows.
Local agents report that employment is growing in the town and that there will be a shortage of suitable properties through till 2018 at the earliest, with lack of supply predicted to drive a 10% rise in the coming year.
“The average house price is €122,000 and unless houses can sell for €180,000, builders will not make money and start building,” said Joe Brady of REA Brady.
In some areas of the commuter belt, those trading down are now in competition with first-time buyers such as In Ashbourne (+2%) and Drogheda, which is predicting a 7% rise.