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“Widening mismatch” between housing demand and supply

Despite the ongoing pandemic restrictions, house prices across Ireland increased 4.5 percent year-on-year in April. This is the fastest level of growth recorded since 2018. Property within the capital saw the lowest annual increases, rising an average of 3.65 percent over that 12-month period, whereas property outside of Dublin saw increases of 5.4 percent. It is worth noting that homes in coastal areas have increased by almost 40 percent (39.4 percent in County Clare!). The impact of the pandemic on residential property prices has been significantly better than forecasted, with most areas experiencing a bump in demand and in prices. 

Over the past year, there has been much talk of the future of work and what that might look like, the death of the office, the decline of the city, and the rebirth of rural areas. While it is still too early to call, the data shows a rallying of offices in the city centre and yet a huge move towards rural living – interestingly, many of these appear to be temporary rentals or holiday homes so it is not clear what the long-term impact will be. Remote working is almost-certainly going to continue to some extent and ‘hybrid’ will likely be the buzzword of the year.
Some of the unforeseen trends influencing supply of homes available for rent and for purchase at the moment include increased personal savings (working households have amassed an additional €15 billion savings since the outbreak of Covid-19), the continuation of remote working and the influx of expats returning home to Ireland. Of course, Brexit is also playing a part in the decision of many  Irish people returning from the UK.

On the supply side, the unprecedented period of construction inactivity has had an effect on the delivery of new homes. While the sector output has not been as badly affected as initially expected, with 21,000 expected to be delivered this year, it is still well below established demand and this is likely to be the case into 2022. 

Latest figures from the Central Statistics Office show that the number of property transactions in April fell by 20 percent, however, on a year-on-year basis, that still represents a 33 percent increase on 2020. Of the 3,138 homes transacted in April 2021, only 14.7 percent were new builds, with the rest made up of second-hand homes. 

According to an article in Reuters, the Irish Central Bank sees potential for significant further house price rises as a result of the “widening mismatch” between housing demand and supply, and this has been echoed by Goodbody. Similarly, The Financial Times reported this week that the shortage of accommodation in Ireland “could last for years across everything from one-bed apartments in Dublin’s city centre to family homes in the suburbs and regions”.  With demand growing, and indeed changing, now might be the right time to revisit previously discounted housing models and explore new models that appear to be working in other cities around the world. 

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group