The Impact of Increased New Homes Supply on Ireland’s Second-hand Market

There has been much controversy surrounding housing data in Ireland recently, with the actual number of new homes delivered in 2017 still unclear. It is apparently in the region of 14,0000 to 19,000, depending upon who you ask and excluding student accommodation.

Real Estate Alliance released their quarterly house price survey for Q2 last week (the Irish Independent REA House Price Index, which is based on achieved sales prices) and it appears that the increased supply in Dublin and the Greater Dublin Area over the past three months is having a dampening effect on second-hand homes locally. This is interesting when you consider that the London housing market, while not in decline, is experiencing the lowest rate of house price growth in five years despite an established need for 66,000 new homes each year for the next four years.  Might Dublin be facing a similar scenario?

The price of second-hand houses in the capital increased by just 0.8% since April 2018, with some areas, like Lucan, recording slight declines for the first time since the recovery took hold. It would be foolish of us not to  pay attention to this when you consider that the rate of increase for 2017 was 12.5% in the same area. This brings the average price of a three-bed semi-detached house in Dublin to €443,000 (€232,500 nationally), which is just €5,000 higher than at the end of 2017. Given the competitive bidding that has been taking place to secure property over the past two years, it is likely that buyers who over-bid or over-paid in recent months are in a barely neural-equity position at this stage.

The new homes market has always been quite distinct from the second-hand housing market, with buyers typically willing to pay more for the shiny new house despite the smaller dimensions and site size, and in some cases, objectively inferior (aka up-and-coming) location. This is particularly true for first-time buyers. By the way, this is not a criticism of new homes, quite the opposite; developers and home-builders have the added challenge of place-making when developing new neighbourhoods. It is one of the core ways to add value to a home or area beyond regional appreciation.

The impact of increased supply to the market is not only affecting second-hand house prices, it is also affecting the length of time these homes sit on the market. Estate agents are reporting difficulties getting “vendors to accept the reality of the situation on the ground where sellers are not achieving the sort of inflated asking prices that they may expect for properties”, according to REA.

You might recall last week that we talked about the seemingly-unstoppable rise in co-working spaces so it was interesting to read REA reference working from home or co-location as a factor in combating commuting and high property prices, particularly in South Wicklow and North Wexford. We will continue to watch this trend.

Ian Lawlor
086 3625482

Director / Business Development
Lotus Investment Group