How reliable are the usually-reliable market indicators?

According to the latest CSO figures released this week, Irish property prices increased 14.4 percent last year. This is the highest annual increase in over six years. The average increase in the capital was just over 13.1 percent, while prices outside of the capital rose by 15.4 percent. Significantly, apartments in Dublin saw the lowest level of increase, while apartments outside of Dublin outperformed houses outside of Dublin – is this a first? The average property price in Ireland now stands at €280,000, or €405,500 in Dublin.

The region experiencing the highest increases (nearly 24 percent) spans the border counties, however, these were coming off particularly low bases so at least some of this can be attributed to a market correction of sorts. Other contributing factors include decreasing levels of available housing and, of course, an increase in demand as a result of hybrid working.

The above CSO figures also measure the difference between the rate of price increases in new and existing dwellings. Less than a quarter of all homes transacted were newly-built homes and, looking at Q4 2021, the price of existing dwellings rose by 16.7 percent, whereas the price of new dwellings rose by only 5.1 percent. There is a lot to unpack in this price increase gap – pricing, buyer pool, property type and size, design, location, or perhaps, might bidding be a disproportionate factor in driving up house prices?

It is worth pointing out that Ireland is not unique. Inflation across the UK has hit a 30-year high and house prices are now at record-breaking levels, having increased an average of almost 11 percent in 2021. This represents the biggest gain in any calendar year since 2002, with average property prices now £274,712, this is 9 times the average salary there. Property prices across the UK are not expected to drop in 2022, but very little growth is forecast for this year (for example, Halifax is predicting the market will only grow by one percent this year).

Despite the looming threat of rising interest rates, the UK position is quite similar to the expectations for the Irish market in 2022, although growth across Ireland may be slightly greater as our proportionate level of undersupply is more severe. The mismatch of supply and demand, coupled with the availability of low-rate credit (for now), is generally a reliable indicator of how the market will perform, but these are less than certain times and one can only ask, how reliable are the usually-reliable indicators?

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group