The Government's housing policy is "driving house inflation" it has been claimed as it emerged that the standard home now costs 7.7 times the average wage.
The MyHome.ie quarterly house price report found Ireland’s property market proved to be resilient to cost-of-living fears and external pressures throughout last year. It found the market had held up better than evidence had suggested in 2022.
The number of vendors cutting asking prices remained at low levels, while house prices were being settled above asking prices. However, the report warned that the resilience of the housing marking is set to be tested this year.
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The report found annual asking price inflation slowed to 6% nationwide, and was 3.6% in Dublin and 7.6% elsewhere around the country. Meanwhile, the report found quarterly asking price inflation dropped by 0.4% nationally, by 0.8% in Dublin, and by 0.2% elsewhere around the country.
Asking prices for the average home in the Republic rose almost 11% to €320,000 in the 12 months to June, it says. It means the asking prices for the average home in Ireland is now €330,000, while the price in Dublin is €436,000 and elsewhere around the country it is €283,000.
Sinn Fein's housing spokesman Eoin O'Broin said the latest report makes for "depressing reading". He said: "Minister Darragh O’Brien will not have met any of his affordable housing targets in 2023 and the targets were too low in the first place. In many cases what is being delivered is far from affordable.
"Meanwhile his controversial policies such as the Shared Equity Loan scheme are contributing to house price rises. Government needs to urgently revise their affordable housing plans. They must provide Local Authorities and Approved Housing Bodies with increased capital and more ambitious targets.
"They must also strip away the red tape that is slowing down the delivery of much needed affordable homes. Short of this, the Government's housing crisis will continue to get worse in 2023."
There were 15,000 available properties for sale on MyHome.ie in the fourth quarter of the year - an improvement on the same time last year but still below pre-pandemic levels. Average time to sale agreed was 2.7 months nationwide which the report said is indicative of a very tight housing market.
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Average mortgage approval in October was €280,600 - up 4.3% on the year. Residential property market transactions are set to exceed €21 billion in 2022, a rise of 7.5% in volume terms compared with 2021.
The average residential transaction in the third quarter of last year was €370,000, almost eight times the average income of €48,000 euro which is the highest multiple in over a decade. The report said it expects to see 28,400 houses completions in 2022, exceeding its previous forecast of 26,500 units completed.
The author of the report, Conall MacCoille, chief economist at stockbrokers Davy, said it appeared the market had held up better than evidence had suggested. “The number of vendors cutting their asking prices is still at low levels. Also, transactions in Q4 were still being settled above asking prices, indicative of a tight market,” he said.
He added that even if mortgage interest rates rise to 4%, debt service ratios are unlikely to become stretched and there will be only a limited headwind to house prices. Mr MacCoille noted that already stretched valuations in Ireland could be exacerbated by the Central Bank’s decision to ease mortgage lending rules to four times income.
He said this gave an upside risk to the 4% house price inflation prediction for next year. He added that recent months had seen worrying trends in the homebuilding sector, with housing starts slowing, and the construction PMI survey pointing to the flow of new development drying up.
“We still expect housing completions will pick up to 28,400 in 2022 and 27,000 in 2023. However, the outlook for 2024 is far more uncertain. The government’s ambitious plans to expedite planning processes are welcome although, as ever, the proof will be in the pudding,” he added.
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