The past year has seen the trend that was established just over 2 years ago in the 4th quarter of 2013 continue. That is to say, that the market in the Carlow area bottomed out in the last quarter of 2013 and since then has seen an increase in house prices and in the level of house sales completed year on year to date.
The reasons for this are fairly clear and simple to understand as confirmed by the most recent Daft House Price Report (Q4-2015). The most important factor is the ongoing and developing shortage of housing for the population at large. This is not difficult to understand as the population continues to increase, whilst there is very little new housing under construction. Inevitably, a supply shortage will tend to create price pressure assuming that there are buyers with adequate funding in the market. All evidence would indicate that the banks are lending more now than in the years of recession albeit under the new stricter Central Bank guidelines.
In my opinion this shortage is set to continue as there is no coherent housing strategy that will make an impact on this situation in the short term. On the positive side, there is a healthy debate afoot and hopefully this will lead to a comprehensive range of measures to alleviate this problem.
Daft estimates an expected increase of 3.5% in the average national house price in 2016 based on a survey of over 1,000 market participants. It also points to a moderate slowing of the time to sell a property on average, although in my opinion, there has been little change in 2015 in the Carlow area. The new Central Bank guidelines for the mortgage lenders requires that a buyer have a deposit equal to 20% of the purchase price to qualify for a mortgage and of course the buyer needs to demonstrate that she has enough disposable income to fund the repayments. The 20% requirement is reduced to 10% for First Time Buyers up to a price of €220,000 and this means that the effect of the 20% deposit rule is negligible for First Time Buyers in the Carlow area. For this reason, I believe that the market for properties with a value below €200,000 has been little effected by the new guidelines. Of course, the effect in Dublin has been marked where a large proportion of properties are valued well in excess of €220,000.
For buyers who are not First Time Buyers the Central Bank guidelines are significant and the Daft House Price Report confirms this factor with a lengthening of the time to sell a property, particularly in Dublin. The report attributes this directly to the additional time required for buyers to save for a deposit. There has been much s
peculation as to whether the new Central bank Governor will change the guidelines. I believe that this is quite unlikely in the short term, as the general consensus is that the guidelines have prevented an overheating of the Dublin market in 2015 after average house price increases in 2014 of over 20%.
The Daft House Price Report quantifies the developing shortage with the following frightening statistic: the stock of properties on the market is at a 9-year low, having fallen from a peak of over 60,000 in 2009, there are now just over 25,000 properties for sale in the country. This is the lowest level since early 2007. In summary, it hard to disagree with a continuing gradual improvement in house values, given the severity of the shortage, the increasing population and the ongoing decrease in unemployment. One caveat in my opinion is the election of a stable government in 2016. This will give business the confidence to continue to invest in the recovery.
Read the full report at http://www.daft.ie/report/q4-2015-houseprice-report-daft.pdf
Ciprian Popescu on Saturday, January 9, 2016 in Carlow News