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Supply shortages deepen and activity levels remain moderate in the market

Sherry FitzGerald, Ireland’s largest estate agents, has announced that the average value of residential property in Ireland rose by 1.2% in the third quarter of 2016, bringing growth in the year to date to 4.0%. This represents a moderate increase on the 3.4% recorded in the corresponding period in 2015.

Commenting on the price performance, Marian Finnegan, Chief Economist Sherry FitzGerald said; “The level of price inflation in the year to date was largely consistent with the same period in 2015, but unfortunately this stability once again masks some very significant indicators of a market in crisis”.

In the first instance, the crisis in terms of supply has deepened. The latest analysis by Sherry FitzGerald Research reveals that the quantity of property available for sale in Ireland has decreased further. In July 2016, approximately 27,800 residential units were advertised for sale nationwide, a reduction of 14% from July 2015. This represents only 1.5% of the private stock. Available stock in Dublin has fallen by 18% in the twelve months, with approximately 4,600 units advertised for sale in July 2016. The commuting counties around Dublin and the regional centres also recorded a notable decrease in supply during the year.

It is also worth noting that despite the re-emerging strength of the economy and growing population, transaction levels remain moderate. The Property Price Register (PPR) reveals that approximately 21,100 residential units transacted during the opening half of 2016. When you exclude multi-family/portfolio sales, this figure reduces to approximately 19,750. As such, transactions nationwide fell by 1% compared to the same period in 2015.

The lack of stock available to purchase is also evident in the rental market, with notable shortages in the quantity of property available to rent. This reflects the high proportion of investors leaving the market and the moderate level of new entrants. This trend has underpinned the rapid increase in rents to pre-crisis heights.

It is worth noting that the same is not true for the price of properties. According to the Sherry FitzGerald barometer of price performance, although prices are increasing, they are still 40.4% below peak levels of 2006.

Marian Finnegan concluded that “All in all, the market remains very challenged with moderate levels of construction and transactions, low stock and rapidly rising rents.

There has been a considerable focus on the residential market over the course of the past year, which is to be welcomed. The announcement of the Government’s Action Plan for Housing and Homelessness this summer has provided a vision for housing, together with a clear strategy on how the vision will be achieved.

The overall plan is ambitious; it is now essential that the plan is actioned. As such, it is crucial that the entire Government supports this ambitious plan, by prioritising the necessary supporting policies in the forthcoming Budget, if we are to see a stable functioning market re-emerge.”

Summary of findings;

• The average value of residential property in Ireland rose by 1.2% in the third quarter of 2016, bringing growth in the year to date to 4.0%.

• Dublin house prices grew by 1.0% in the third quarter, bringing the year to date growth to 2.7%. This compares to growth of 1.4% in the same period the previous year.

• Growth outside Dublin remained stronger than in the capital; the quarterly national growth figure excluding Dublin stood at 1.6%. However, the year to date figure came in at 5.6%, moderately down on 6.3% recorded in the same period in 2015.

• The regional centres outside Dublin saw relatively strong price growth during the year to date. Cork recorded a growth of 5.5% in the nine months to end September.

• The Property Price Register (PPR) reveals that approximately 21,100 residential units transacted during the opening half of 2016. Due to the time lag in logging data to the PPR, the first six months is the most accurate data available. Excluding multi-family/portfolio sales, the figure declines to approximately 19,750, down 1% year on year.

• In Dublin approximately 6,130 sales were recorded, representing a very moderate increase of 2% year on year.

• In terms of new dwellings, sales activity encouragingly picked up during the second quarter, increasing by 9% on the same period in 2015.

• A comparison between the Property Price Register (PPR) data to the mortgage market data by Banking and Payments Federation Ireland suggests that cash-buyers have maintained their role in the housing market, accounting for 47% of all transactions in the first half of 2016.

• The latest second-hand supply analysis by Sherry FitzGerald confirms supply levels have further decreased. In July 2016, approximately 27,800 residential units were advertised for sale nationwide, a reduction of 14% on July 2015.

• Available stock in Dublin was down 18% annually, with approximately 4,600 units advertised for sale in July 2016. This represents only 1.0% of the total private stock.

• Commuting counties around Dublin recorded a decrease in supply during the 12 month period, albeit a more moderate decline compared to Dublin.

• Across the regional centres, a reduction in supply figures was also recorded. The Galway market witnessed the strongest decrease of 15% in its available stock.

• Owner occupation continued to dominate the purchaser profile at 71%, while investors accounted for 20% of all purchasers during the first three quarters of 2016.

• An analysis of the profile of vendors who sold their property through Sherry FitzGerald in the nine month period revealed that 32% of vendors were selling investment properties, while executor sales accounted for 15% of the market.