Daft.ie published its latest House Price Report for the third quarter of 2019.
From the report:
There were almost 20,000 homes built between the middle of 2018 and the middle of 2019, twice the number built during the twelve months of 2016.
Just under two thirds of that increase in building activity has been in the Greater Dublin Area and, for the moment at least, the new homes built have been concentrated in the owner-occupied sector.
But new housing supply is not the full story of what’s going on. The elephant in the room, for the Irish economy, is Brexit.
To understand how that something that has not happened yet could affect housing prices now, it is important to remember a key difference between the sale and rental segments.
Across both segments, fundamentals of supply and demand matter. If more homes are built for a particular segment, this will lower prices everything else being equal.
If incomes rise or if the numbers at work increase, this will increase prices, both sale and rental.
However, for sale properties, the purchaser is committing to hold the asset and thus they have to pay attention to its future value too.
This difference also means that credit is prevalent in the for-sale market, due to its much higher price level, but not the rental market.
Therefore, both credit conditions and expectations about future prices are key factors in converting ‘real demand’ into effective ‘on the ground’ demand in the sales market.
If Brexit, in whatever form it takes, reduces Irish employment and incomes, this will be seen in the rental market.
If Brexit is expected to affect Irish employment and incomes in the future, this will be seen in the sales market.
The report can be read in full here.
If government want house prices to rise (which they shouldn’t), they should make it easier to access credit.
If government want more people to become homeowners, then wages and income need to rise.
From a societal perspective, it’s better to have higher wages than more debt.
— Aidan Regan (@Aidan_Regan) September 23, 2019