Intense homebuyer demand for limited stock increases market heat
The highest rate of transactional activity among homebuyers since the recession has led to the fastest pace of asking price inflation growth in 18 months, according to the latest quarterly house price report from MyHome.ie in association with Bank of Ireland.
The Q1 2024 report found that annual asking price inflation was 6.5% nationwide. The last time this annual figure was higher was in Q3 2022, when inflation was 7.8% nationwide.
Annual asking price inflation in Dublin has now accelerated to 7.2%, outpacing the 5.5% figure in the rest of Ireland.
Meanwhile, the report found asking prices rose by 2% on the quarter nationally, by 2.3% in Dublin and by 1.7% outside the capital.
This means the median asking price for new instructions nationally in Q4 was €340,000. In Dublin it was €425,000 and elsewhere around the country it was €285,000.
Other findings include:
- CSO data shows homebuyer transaction volumes increased by 1.4% in 2023, whereas buy-to-let (-9%) and non-household purchases (-7%) fell back sharply. This meant homebuyers accounted for 71% of transaction volumes in 2023, the highest proportion since 2013. The data shows strong demand from the state for social and affordable housing is being offset by the decline in purchases from institutional investors into the private rented sector.
- In early 2024, houses were being sold for 4.6% over the original asking price, at the median. This is a stark change to one year ago, when the median premium was just 1%.
- Just 0.9% of homes listed for sale on MyHome.ie cut their asking price to secure a sale in Q1, a fresh record low and indicative of the tight housing market.
- The average first-time-buyer in H1 2023 had an income of €88,258, up 6.7% from €82,641 in H1 2022. Hence, the average mortgage approval for house purchase rose above €300,000 for the first time at the end of 2023, up 6.4% on the year.
- In H1 2023, 25% of first-time buyers had loan to income ratios just below the 4x regulatory threshold, versus just 6% before the Central Bank loosened its mortgage lending rules.
- The number of properties listed for sale on MyHome.ie hit a fresh record low of 10,935. This is below even the Covid-19 trough of 11,200, and down 19.5% on the year.
- However, homebuilding activity continues to pick up. There were 7,056 housing starts in the first two months of 2024, up 72% on the same period in 2023.
Analysis:
The author of the report, Conall MacCoille, Chief Economist at Bank of Ireland, said: “The message from this quarter’s MyHome.ie report is that the housing market is heating up again. MyHome asking prices rose by a solid 2% in the first quarter, with the annual inflation rate accelerating to 6.5%, its fastest pace in 18 months. Notably, Dublin – where valuations had become most stretched during the pandemic – is joining in the rebound, with annual asking price inflation of 7.2%.
“We can see that demand is particularly intense from transactional activity. The number of homebuyers (first-time-buyers and movers) rose to 44,100 in 2023, up 1.4% on 2022 and accounting for 71% of total transactions. This is the highest proportion of transactions accounted for by homebuyers since 2013. In contrast, household buy-to-let purchases fell by 9% in 2023, no doubt hurt by higher interest rates.
“It is also significant that the number of non-household transactions fell by 6.6%, to 12,300. Of late, the role of the state in purchasing homes has received much attention. However, the fact that total non-household purchases fell so sharply in 2023 must also reflect reduced demand from institutional investors in the private rented sector.
“Earlier this year we saw houses nationally being sold for 4.6% over the original asking price, at the median. This is a major change to one year ago, when the median premium was just 1%.
“Supply continues to be a concern; the number of properties listed for sale on MyHome has hit a fresh record low of 10,935 properties. This is below even the Covid-19 trough of 11,200, and down 19.5% on the year.
“It is worth noting, however, that the 63,000 residential transactions recorded in 2023 is the highest number recorded since the Property Price Register started collecting data in 2010. In absolute terms housing supply is slowly improving, but the gap with robust housing demand is growing.
“In summary, there has been no let-up in demand, and with the supply situation still difficult, it is not too surprising that house price inflation has regained momentum. We expect to see a mid-single digit rise in Irish house prices in 2024, close to 4%.”
Joanne Geary, Managing Director of MyHome.ie, said: “As always, supply continues to be a hot topic for the property market, but we are encouraged by the number of housing starts in the first two months of the year. The figure of just over 7,000 starts is up an enormous 72% on the same period in 2023. Our lack of stock is not something which will be solved overnight, but it is good to see that we are moving in the right direction.”
