According to IPAV’s latest Residential Property Price Barometer, the overall average increase in property prices for 2021 was just short of 12%.
The Institute of Professional Auctioneers & Valuers captures house prices auctioneers achieved for three- and four-bedroom semi-detached homes and two-bedroom apartments.
Providing a county by county breakdown for each property type, the latest barometer records prices in the latter half of 2021 and compares them with prices in the first half of the year.
2021 property prices
According to the report, Mayo saw a 13.04% increase in the three-bedroom category in the latter six months of the year.
This was the second-highest, along with Wexford and just behind Clare.
There was a 7.14% increase for 4-bedroom houses and 3.03% for two-bedroom apartments.
Pat Davitt, chief executive of IPAV, noted that during 2021, in particular, the differential between asking and achieved prices was “crucial”.
Hybrid working arrangements
He said “intense” demand against a scarcity of supply led to a trend whereby agreed prices often exceeded asking prices, sometimes to a “considerable” degree.
“However, there is a myriad of factors impacting the market. Many buyers, particularly those with family connections to the country, now see living in the country as a realistic, more affordable option given the new hybrid working arrangements.”
He said coastal or “unique” properties are attracting “greater” interest.
“Hence we are seeing the higher increases this time around in areas like Wexford, Clare, Mayo and Donegal.”
And he said while prices are “now very close” to 2006/7 levels, the market is “drastically different”.
He said at that time, there was no shortage of supply; Ireland was building 93,000 units per year.
“There was excessive lending with banks often approving several prospective buyers for the same property. They ended up competing against each other, thereby pushing up prices.”
“In contrast, what we now have is a shortage of supply and very tight lending practices, with the Central Bank of Ireland’s macroprudential mortgage rules.”
He said many properties are being purchased from savings, and parents are contributing hugely to deposits for young buyers.
He added that those hoping to own their own homes realise it makes “sound financial sense” to try and get a mortgage.
Reasons he pointed to:
- Rental levels exceed the cost of repaying a mortgage, often to a considerable extent;
- Ireland has introduced “genuine” long-term fixed interest rates of up to 25 and 30 years. Repayments are set for that entire period and cannot fluctuate, regardless of market conditions
He said such mortgages at interest rates of the order of 3%, even though “way ahead” of the euro area average, are unprecedented.
Family support and higher income
However, he views scarcity of supply as a “real” problem. Therefore, he said the current market favours those on higher incomes and those fortunate enough to have family support.
He said, in some cases, it is also preventing potential sellers from placing their properties on the market “in case they would not find a suitable home, or that by the time they do, the price they would have to pay may have outstripped their planned budget”.
Upward trajectory for house prices
IPAV has sought adjustments to the Central Bank mortgage rules, particularly to assist those on average incomes who could afford to service a mortgage.
Mr Davitt said supply is improving, but so far not quickly enough.
He believes Ireland needs measures that:
- Tackle severe planning impediments;
- The tax take on buying a home where mortgage holders borrow money and pay interest on those borrowings for the lifetime of the mortgage to cover upfront VAT charges.
He said unless these issues can be dealt with without further delay, the “storm clouds of rising inflation” could scupper many prospective buyers.
“While the ECB is not predicting an interest rate rise for 2022, if current high levels of inflation across the EU persevere, that situation will no doubt change, hampering the ambitions of some buyers but also impacting house prices, which for now look like continuing on an upward trajectory,” he concluded.