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. This is according to the Society of Chartered Surveyors Ireland (SCSI).
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.
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 the third quarter, by the final quarter, 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. While figures from the Residential Tenancies Board (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.
Commenting on the report, The Vice President of the SCSI, TJ Cronin said, "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."
He added, "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."