Estate agents concerned by continued rise in property prices

Estate agents who are members of the Society of Chartered Surveyors Ireland (SCSI) expect national property prices to increase by an average of 5% over the next twelve months, a slight reduction from the 6% forecast in January.

 According to the latest SCSI Residential Mid-Year Market Monitor, over half of agents believe the key factor influencing house prices over the next 12 months will continue be the supply – or more accurately, the lack of supply – of new housing.

Eighty-eight per cent of agents believe current residential property prices are expensive or very expensive – up 5% since January – while just 12% believe they are currently fair value.

When asked where they believe we are in the market cycle, 60% of respondents believe prices are increasing but will level off soon while 18% believe they have peaked and should start to decline.

Gerard O’Toole, President of the SCSI, said the report indicated mounting concern over the supply situation and by extension with a recent slowdown in home construction.

“Fifty-one percent of agents in our survey cite lack of supply as the main factor driving price inflation, up from 46% a year ago. In 2023, the figure was 35%, so we can really see the impact the lack of supply is having on house prices. At the same time, 70% of agents are reporting low stock levels of new and second-hand homes, again underscoring the persistent challenge of limited supply in the market.

“Over the past five years more than half of agents have consistently highlighted low stock levels, stressing that constrained supply remains a fundamental issue impacting the market.

“With the ESRI forecasting that 37,000 new homes will be built this year, well short of the Government’s target of 41,000, the urgent need to address infrastructural shortcomings and for the Housing Activation Office to become fully operational as soon as possible cannot be overstated,” stated O’Toole.

“The other main factors, which our members believe are influencing price movements include the state of the economy (20%), while a further 16% said the continued availability of government support schemes such as Help to Buy and First Home Scheme are influencing house prices.

“Eighty-eight per-cent of agents believe property prices are expensive or very expensive, the highest figure we’ve recorded. We have had 12 years of continuous price growth and the level of increases we have seen in recent years is just not sustainable.

“Looking at where we are in the market cycle, 78% of agents believe prices will level off soon or have already peaked. In the medium to long term, the only way to ensure prices stabilise is to ramp up supply,” Mr O’Toole said.

Affordability scenarios  

With property prices nationally, according to the CSO, having increased by 164.8% from their trough in early 2013, the SCSI included five scenarios involving a couple’s earning a combined income of €107,000 in the latest monitor. The scenarios demonstrate the affordability gap, if any, which exists between the total mortgage purchase limit available to a couple on a garda and nurse income looking to buy their first home based on average new house purchase prices in five different locations.

According to these scenarios, a couple on a combined salary of €107k who want to buy a new privately built 3-bedroom semi-detached home and who have the 10% deposit having availed of the Help to Buy Scheme along with their savings, will afford to buy in only one of the five locations, namely Cork.

The case studies indicate prospective buyers in Wicklow will face a shortfall of almost €65,200 while in Kildare the figure is €22,000. Gerard O’Toole said, the new figures show that affordability has become more challenging across various house types and locations.

“While a new 3-bedroom semi-detached home is affordable in Cork and buyers with additional savings beyond the 10% loan-to-income limit should be able to overcome the gap in Meath and Galway, new 3-bedroom semi-detached homes in Wicklow and Kildare remain totally out of reach for people on these salaries. In addition, there are thousands of people on lower salaries who will not be able to buy and will require support.”