A Look Back at Ireland’s Housing Market in 2019

2019 was a broadly solid year for Ireland’s housing market (although it didn’t always feel like that). 50,534 property transactions have been registered in 2019 to date, which is slightly below the figure for 2018 (57,189) but this might change when December’s transactions are factored in. These figures are an important starting point for analysing the market performance over the past 12 months.

Residential Property

The pace of house price growth flattened, particularly for properties in excess of €500,000. This was blamed on a whole range of issues, from the prevailing Central Bank macro-prudential policy rules and a decline in net inward migration, right through to Brexit uncertainty. Newly-built and second-hand properties below €275,000 attracted the most consistent demand.

The decision not to relax the Central Bank’s restrictive mortgage rules has undoubtedly tempered house price growth in the cities. This decision was heavily criticised, yet objectively, it is likely the right policy (arguably at the wrong time). First-time buyers still make up more than 50 per cent of all mortgage drawdowns.

Property prices are now rising by just 0.9 per cent, the lowest level of increase in almost 12 years. The latest official figures from the Central Statistics Office (CSO) show prices in Dublin, which has seen the largest increase in residential construction, actually dropped 1.5 per cent over the 12 months to October.

New Homes

The extension of the Help-to-Buy (HTB) scheme in Budget 2020 was a welcome and important move by the Government for the sector, but frankly, it wasn’t enough. Construction activity continued to grow, with a 22 per cent increase in residential completions over the past year (not including student accommodation).

The Irish Times last week referenced a Construction Industry Federation report that demonstrates 41 per cent of the cost of delivering an apartment is related to taxes, levies, the cost of finance and land costs. It stated that “unless some of these costs are reduced, development finance is more accessible and the delivery schedule of utilities are aligned with housebuilding, the industry will continue to struggle to increase output to 34,000 per annum”. 

Rental market 

Half a million households across Ireland are now in rented accommodation (private and social). Despite appearances, this is bad news for both tenants and private landlords, with an increasing number of landlords opting to leave the market altogether. The average monthly price of rent is at an all time high of €1,403. The most expensive rental prices are being recorded in South Dublin at €2,224 and the lowest prices are observed in Leitrim at €616 per month according to the Q3 Rental Report by Daft.ie. In the same report, it is stated that national inflation of the private rental market has fallen from over 12 per cent in mid-2018 to 5.2 per cent in the third quarter of 2019.

Private landlords were offered little relief by Budget 2020, with circa. €2 million being allocated for additional funding to the Private Residential Tenancies Board to investigate non-compliance within the 44 rent pressure zones currently in place.

Private Rented Sector (PRS) 

Unsurprisingly, the private rented sector (PRS) outperformed all other sectors in 2019 and it is dominating it too. According to the Irish Times it has grown from just 6 per cent of the Dublin market in 2016 to 55 per cent in the first nine months of 2019. This puts it on track to finish the year with close to €2 billion worth of transactions. It also raises the question of sustainability of such an unbalanced tax system that allows institutional investors benefit from significantly preferential tax treatment

Commercial Property 

Budget 2020 saw an increase in the rate of commercial stamp duty from 6 per cent to 7.5 per cent, which was heavily criticised by the biggest players in the commercial property sector. The increased rate will not only apply to transfers of land and commercial property, but also to contracts for the sale of other types of assets, such as debtors, goodwill or the benefit of contracts, and to certain lease premiums.

What will 2020 bring? One can only wonder…