Strong housing demand expected to push high prices as supply issues keep biting
After a subdued start due to the pandemic, the housing market took off with a bang in 2021, leading to double-digit price growth. A mix of soaring demand, restricted supply, historically low interest rates – and an increased focus on lifestyle, thanks to the move to remote working – turned up the temperature on property prices right across the country.
Nationally, prices rose by 12.4 per cent in the year to September 2021, with prices up 11.5 per cent in Dublin, according to the Central Statistics Office.
However, a moderation in demand combined with an increase in supply means house price growth should start to slow over the coming year.
David Cantwell, director, Hooke & MacDonald
2021 was an extremely active year for residential sales. Sales of new three- and four-bedroom houses in Co Kildare, Co Meath and Co Wicklow were particularly buoyant, with demand significantly exceeding supply in all areas.
The biggest challenges for developers in responding to the demand for new homes are the rising cost of labour, materials and utilities, as well as delays in achieving planning permission. This is caused by an inefficient planning system, a surge in objectors and judicial reviews causing chaos for supply. The irony is that some of the objectors are politicians who should be facilitating the supply of new homes rather than impeding it.
While most people do not seem to want new housing beside them, the reality is that new building and increased supply is the only long-term solution to our housing crisis so it’s the responsibility of everyone to take a more welcoming approach.
Apartments were in good demand but the non-viability of delivery of new apartments has starved the market of apartments for sale, except in a small number of high-end apartments in Dublin 4 and south Co Dublin. The fact that more than 50 per cent of the delivery cost of each new apartment goes on non-construction items such as VAT, planning costs and levies, water and other utility costs is preventing the supply of homes that are needed to achieve urban densification.
The second-hand residential market had a busy year with the middle and upper ends being particularly strong, with multiple competitive bidding on most properties and guide prices being generally exceeded. Prices are likely to moderate somewhat in 2022, with housing completions likely to reach 27,000. Energy rating will become more important to purchasers in determining what price they should pay.
Article originally published in The Irish Times, Dec 9 2021.