The Irish Property Market in 2019
Visionary Frenchman Michelle de Nostredame had an uncanny knack of predicting the future, including the death of kings, revolutions and natural disasters, but even he might struggle to accurately forecast what 2019 holds for the Irish property market.
There are some strong indicators about what 2019 has in store for buyers, sellers and builders.
Here is what the experts – and our own research – forecast for the market in the year ahead:
- House Prices Will Rise
- More Homes Will Be Built
- Ongoing Mortgage Difficulties
- The Unknown Impact of Brexit
House prices will rise:
The only way is up, if all the evidence is to be believed, although Dublin’s property hothouse could cool down just a little.
Estate agents predict that house prices nationally will rise by 4.2% this year, although this will be lower in the Dublin area, at between 2.8 and 4%.
They forecast increases of 4% in north County Dublin and 3.5% in the south.
Outside Dublin, estate agents in three of the four largest cities are quietly optimistic about 2019, with rises of 4% predicted in Cork and 5% in Galway.
Our own analysis of sales trends for the capital shows that the average price of a detached house in Dublin has hit €1 million.
At the other end of the scale, duplex prices are an average of €320,000 and studio apartments are selling for an average of €250,000.
But the market is still dominated by two and three-bedroom homes, which account for 64% of transactions.
Further up the scale, larger homes are in short supply and the price jump between a three-bedroom and four-bedroom property is an eye-watering €276,000.
That’s a huge gap between the average €430,000 for a three-bed home and the €706,000 you would have to shell out for an extra bedroom.
It’s no surprise that there is also a big premium for those wanting to live in certain areas of Dublin – the average is €1.39 million for the 5 most expensive areas:
Turning that on its head, there are bargains to be had – relatively speaking – in other areas of Dublin, where prices are €175,000 on average. The 5 most inexpensive areas are:
A stark example of the imbalance in Dublin’s property market is that while more than 60% of searches are for detached and semi-detached homes, there is only 25% availability in these categories.
More homes will be built
The country has been crying out for more new homes for years and there are signs that genuine progress is being made, even though there is still a long way to go.
Ireland needs up to 35,000 new homes a year and 550,000 by 2040 to catch up with demand and cater for an increasing population, due to rise by a net 40,000 this year.
But while Central Statistical Office (CSO) figures showed a 30% increase in new home building in the first six months of 2018, that equated to just under 8,000 properties.
For the full year, the number of new homes built in Ireland last year rose by 25 per cent according to the CSO, with just over 18,000 new dwellings.
That is still short of the 35,000 target but the good news is that the Government recognises there is a problem and is treating it as a priority.
Taoiseach Leo Varadkar admitted: "We have a housing crisis… the solution is to build new homes and more homes and that’s happening. It is going to take time, but we are getting there.”
The signs are encouraging, with new home completions rising for several years, but on the flip side the target is likely to be missed again this year and in 2020.
A total of 25,000 new homes a year over the next two years is a more realistic prospect, although not a guaranteed one.
Getting a mortgage will remain difficult:
There’s no doubt that getting a mortgage in Ireland is tougher than it has ever been.
The Central Bank has come down hard on loan-to-income ratios after learning the brutal lessons of the financial crash that killed the Celtic Tiger.
That will continue in 2019 and it means buyers will have to knuckle down and save harder for a deposit and wait longer for that precious mortgage approval.
But, as we have said before, that is not entirely a bad thing, as it could also reduce the risk of buyers going into negative equity or even losing their homes.
The Central Bank said its mortgage-lending rules will protect the market against a housing bubble that caused so much misery in 2008.
With more new homes being built year on year, the Government’s Help To Buy scheme remains an attractive option for first-time buyers.
This contributes 5%, or €20,000, towards the purchase price of a new home and watch out for house builders offering incentives of their own.
The economy will grow:
According to Chartered Accountants Ireland, the outlook for 2019 is bright, helped by higher Government spending, rising wages and falling unemployment.
They forecast that Ireland’s Gross Domestic Product (GDP) will grow by 4.2% in 2019, mainly due to the strength of the domestic economy.
Consumer spending will be up too, they predict, by 2.9% , driven by population growth, more people in work and pay awards outstripping inflation.
Employment growth will be at around 2.7%, meaning 60,000 more jobs which will bring unemployment down to 4.9%.
Wages are forecast to rise by 3.6% this year and the inflation rate is predicted to be around 1.8%.
But that could go higher as Ireland’s economy continues to expand and potential black clouds include a slowdown in the global economy and the ‘Brexit effect’.
Nobody knows what the Brexit effect will be:
This is the one area that would have left Nostradamus flummoxed – it’s clear that even Britain’s most senior politicians are unsure what happens next.
One thing is certain though – a disorderly, or hard, Brexit would hit Ireland very hard, right across the board and the property market would not escape the fallout.
The Taoiseach will no doubt have made that very point in Dublin when he hosted British Prime Minister Theresa May.
The government has also stepped up its plans for a hard Brexit, publishing a 130-page document last month covering 19 sectors of the economy.
This could include buying land at Dublin and Rosslare ports to deal with delays caused by customs checks amid a raft of other measures.
Deputy Prime Minister Simon Coveney said some of the options Ireland faced were ‘stark’ and that a hard Brexit would be ‘to everyone’s cost, most notably Ireland.’
As far as the property market goes, if the UK leaves the EU without a deal it would take us ‘into the unknown’ according to many estate agents.
Prices could level off, or even fall in some areas and Brexit uncertainty is already being felt, with prices growing nationally by less than one per cent in the last quarter of 2018.
Other experts point to Bank of England Governor Mark Carney’s forecast that a hard Brexit would see UK house prices tumbling by as much as 30%.
Nobody predicts they would fall to that extent in Ireland, but there could be an adverse impact on house prices here, at least in the short term.
The top end of the Dublin market could be hit, as many wealthy individuals who do business with the UK which could be disrupted by a hard Brexit.
Popular locations for holiday homes, including Howth, Malahide and Wicklow, could also suffer from the loss of UK buyers.
But there could be some positives, including an influx of high-earning bankers as employers move to Dublin from the UK and British expats relocate from Spain and France after Brexit.
To conclude on a positive, a hard Brexit is not guaranteed and it is still possible that the UK will strike a deal with the EU or opt to extend the Article 50 withdrawal process.
It could even end up staying in the EU as calls for a second referendum, or ‘People’s Vote’, grow louder and Prime Minister May’s proposed deal struggles for approval.
2019 in a nutshell:
Dublin’s housing market is moving in the right direction, aided by favourable economic factors.
Prices are likely to rise, more homes will be built and buyers who save hard for a mortgage deposit will enter a market where the rate of price increase has stabilised.
In short, all bodes well for 2019 with no Nostradamus-style disasters ahead – as long as our neighbours across the water don’t put a British spoke in the Irish wheel with the impact on the house market post-Brexit still largely unknown.