Property values increased across all regions in 2014 as did activity levels according to the annual residential property report of the Society of Chartered Surveyors Ireland.
According to the national survey of over 400 estate agents, property values are estimated to have risen by approximately 14% nationally.
In Dublin, property values are estimated to have risen by 19.5%. In Leinster (excl Dublin), values are estimated to have increased by 15.8% while in Munster and Connacht/Ulster they rose by 9.6% and 10% respectively.
SCSI members expect property values will continue to increase in 2015 by between 5 to 10% depending on location but they also point out that there are significant challenges facing the market. Seventy two per cent of SCSI members reported an increase in the level of activity in the last quarter of 2014, 16% reported a decrease and twelve per cent noted no change.
Seventy eight per cent of those surveyed reported that vendors’ expectations had increased while 20% said vendor expectations remained unchanged. Based on figures contained in the Property Services Regulatory Authority’s Residential Property Price Register the median price for a residential property nationally (excluding Dublin) in 2014 was €179K while the corresponding figure for Dublin was €252K.
The SCSI said that the increases in activity in the property market reflected improvements in the wider economy, in the employment situation and in foreign direct investment. But it warned that the increases were coming off a relatively low level of transactions compared to other European countries and that they varied significantly by location.
Simon Stokes, Chair of the SCSI’s Residential Property Professional Group said; “The lack of supply of family type homes in the main urban areas together with increased demand from prospective purchasers has resulted in double digit increases in average property prices across the country, particularly in the first 9 months of the year. Supply restraints will lead to increased demand in commuter belt counties”.
According to survey respondents, the moderation in average residential property value increases in Q4 – most notably in Dublin – was largely due to buyer apprehension around the Central Bank proposals which if implemented will require buyers to have 20% deposit.
Mr Stokes said this measure will impact Dublin the most, where property values are higher than other parts of the country and where buyers have to raise a much larger deposit.
“We now need clarity around the proposed measures so that people wishing to buy can plan ahead and avoid further uncertainty. The proposal is also causing apprehension among builders planning new housing developments, which the market urgently requires. While the SCSI agrees with the objectives of the Central Bank we believe a deposit in the range of 10 to 15% would be more appropriate” he said.
According to the study cash buyers accounted for 40% of all residential sales in 2014 but SCSI members expected this level to fall in 2015 as the level of mortgage lending approvals increases.
The report also suggested that the shortage of supply in the sales market is putting disproportionate pressure on the residential rental market with rents increasing by an average of 11% nationally in 2014.
In Dublin, rents increased by an average of approximately 15%, in Leinster by 13%, in Munster by 8% and in Connacht/Ulster by 9%. “While rents are still approximately 5-10% off peak levels in prime Dublin locations, the continued increase in rents is threatening our economic competitiveness” Mr Stokes said.
The SCSI also said that supply was still a key issue in certain urban areas and welcomed measures being introduced by Government under Construction 2020 to support new developments to meet the housing supply shortage in urban areas.
The SCSI said that access to development finance remains a challenge for developers. Conor O’Donovan, the SCSI’s Policy Director said “The Housing Agency has estimated that there is a minimum requirement for 80,000 units over the next 5 years. Approximately 11,016 units were completed in 2014, which is an increase of around a third on 2013 completions” he said.
“This is a step in the right direction but only represents around half of what is needed to be built on an annual basis to restore a level of sustainability to the residential sales and rental sectors and to ensure more moderate price and activity levels” Mr O’Donovan concluded.