SCSI Residential Property Mid-Year Market Monitor 2024
The Key Findings:
- Three out of four agents report low stock levels – almost half say the lack of supply is the main driver of price inflation
- Over 80% of agents describe current residential property prices as expensive or very expensive
- 77% believe prices are increasing but will level off soon
- While agents say the number of buy-to-let properties coming to the market is continuing to increase, the rate of increase has declined significantly
- The report includes affordability scenarios for Cork, Galway and three Leinster commuter belt counties
- An average couple on a combined income of €107K who want to buy a new 3-bed semi and have the 10% deposit will afford to buy in only one of these locations
- In the two most expensive counties, Wicklow and Kildare, couples will still face shortfalls of €78,000 and €65,000 respectively
- SCSI says widening affordability gap a ‘real concern’
Friday, August 16th, 2024: Estate agents who are members of the Society of Chartered Surveyors Ireland (SCSI) expect national property prices to increase by an average of 4.5% over the next twelve months. This is up on the 1% increase which SCSI agents forecast for 2024 back in January. According to the latest SCSI Mid-Year Market Monitor, almost half of agents (46%) believe the key factor influencing house prices over the next 12 months will be the supply of new housing. Eighty-two per cent of agents believe current residential property prices are expensive or very expensive, while 17% believe they are fair value.
When asked where they believe we are in the market cycle, 77% of respondents believe prices are increasing but will level off soon – up from 43% last year. Gerard O’Toole, Vice President of the SCSI, said the clear message from the report was the urgent need to increase supply. “Seventy-five per cent of agents reported low stock levels, up from 71% twelve months ago, highlighting the ongoing issue of insufficient supply. Our members are seeing the impact of the lack of supply on the ground and believe this shortage will continue until annual completion levels ramp up significantly. A year ago, 35% of agents identified the lack of supply as the main issue for the price movements, now that number is 46%.”
“The other main factors, which our members believe are influencing price movements include the state of the economy, interest rates and the availability of credit, access to schemes supporting house purchases such as Help to Buy and changes in the levels of immigration and emigration. The findings show a slight decrease in concerns about interest rates since the last report, reflecting the ECB’s recent decision to reduce rates. One area of concern for agents is an increase in the number of sales agreed but not proceeding to completion. They believe delays caused by planning irregularities, non-compliance with building regulations as well as delays regarding probate and accessing property deeds, are continuing to pose challenges.”
The SCSI and the Law Society of Ireland recently launched a consumer guide entitled ‘Speed up your property sale’. It’s available at scsi.ie/sell/.
Current Affordability Scenarios
With property prices nationally having increased by 144.5%* from their trough in early 2013, the SCSI included five scenarios involving an average couple’s earning a combined income of €107,000** in the latest monitor. The scenarios demonstrate the affordability gap, if any, which exists between the total mortgage purchase limit available to a couple on average incomes looking to buy their first home and average new house purchase prices in five different locations.
According to these scenarios, an average couple on a combined salary of €107K who want to buy a new 3-bed semi and who have the 10% deposit having availed of the Help to Buy relief will afford to buy in only one of the five locations, namely Cork, and only then with the support of the First Home Scheme. However, prospective buyers in Wicklow will face a shortfall of almost €78K, while in Kildare the figure is €65K. Gerard O’Toole said, the figures showed the massive challenges facing first-time buyers in the current market.
“Last year our case study ‘couple’ could buy in three locations without the support of the First Home Scheme (FHS). This year a new home is only affordable in one and that is with FHS support, so the widening affordability gap is a real concern. While buyers with savings should be able to overcome the gap in Meath and Galway, new 3-bed homes in Wicklow and Kildare remain totally out of reach for people on these salaries. In addition, there are thousands of people on lower salaries who will not be able to buy and will require support.”
“This year’s report included an affordability scenario for a two-bed terraced house in all five locations and the picture here was a great deal more positive with the affordability gap met in four locations without recourse to FHS while in Wicklow it was met with the support of FHS. While the viability of new residential projects remains challenging, the fact that some construction costs look to be levelling off and interest rates are expected to fall are positives. But the current pace of property price inflation is not sustainable. In order to get to grips with it we need drive up supply as a matter of urgency while also doing everything possible to drive down costs.”
“Soft costs make up around half the cost of delivering new homes, and while the SCSI welcomed the Government’s decision to waive development levies, more work remains to be done with regard to the cost of finance for homebuilders, planning reform, the resourcing of local authorities and the costs of utility connection charges.”
“The SCSI has long supported the introduction of a higher density, more broadly integrated housing mix which better reflects the needs of modern Irish society. We believe the adoption and successful implementation of such a policy using modern methods of construction is vital in addressing the affordability / viability nexus.”
Rental Sector
The SCSI tracks members’ views on the activity of landlords placing their investment properties on the market for sale. While this year’s report found that there has been an increase in the number of buy-to-let properties coming to market over the past six months, the rate of increase of this trend has fallen significantly since Q4 2023.
Gerard O’Toole says the SCSI will continue to carefully monitor this trend. “The ratio of owner-occupied properties to investment buy-to-let properties which agents are selling has remained unchanged at 60:40. While agents have noticed a noticeable fall off in the number of landlords leaving the market, the number is still rising. The three main reasons they are leaving is because rent legislation is too complex and restrictive, net rental returns are too low, and some landlords are coming out of negative equity.”
For the first time this year’s report included a rental affordability analysis for a family renting a 3-bed semi or 2-bed terraced home in the same five locations as above. For 3-beds, rents ranged from €2,139 in Meath to €2,475 in Wicklow. Including reasonable living expenses of €3,504 for the family of four, this means that the estimated total expenses for a family renting in Meath would be €5,643 while it would be €5,979 in Wicklow. Rents for a 2-bed terraced house ranged from €1,733 in Galway to €2,061 in Wicklow. Including living expenses this means that estimated total expenses for a family of four in Galway would be €5,237 while in Wicklow it would be €5,565.
“These figures show just how challenging it is for a family to rent a home in Ireland and the minimum salary level required. In Meath, for the family renting a 3-bed semi, the rent comprises 38% of total living expenses, while in Wicklow, it comprises 41%. For a family renting a 2-bed terraced house in Galway and Wicklow, the figures are 33% and 37%, respectively. It is generally accepted that spending more than 30% of income on rent is an overburden and makes renting unaffordable. We will continue to gather and monitor this data and share it with relevant stakeholders,” Mr O’Toole concluded.
To see the full report, go to www.scsi.ie
Ends.
*CSO Residential Property Price Index May 2024 Residential Property Price Index May 2024 – Central Statistics Office
**The average salary is based on the combined wages of a garda and a staff nurse after 10 years of service. Combined gross salary €106,855 (Garda after 10 years’ service €55,592; staff nurse after 10 years’ service €51,263. Their total Loan-to-Income (LTI) maximum loan limit is €373,993k (3.5 x gross salary). As first-time buyers they require a 10% deposit.
***This year the analysis includes the First Homes Scheme which could provide buyers with up to 20% funding towards the purchase price for those drawing down the Help to Buy scheme also.