More than 80 per cent of Irish estate agents believe property prices are either “expensive” or “very expensive”, according to a new report by the Society of Chartered Surveyors Ireland (SCSI).
Despite this assessment, the report predicts house prices will increase by a further 4.5 per cent in the coming 12 months on the back of limited supply, high construction costs, population growth and “persistent delays in the planning”.
It also highlighted the affordability challenge faced by prospect buyers, suggesting that a couple on average wages could not afford to buy a typical new-build home in four of the five areas assessed, which included Cork, Galway, Kildare and Wicklow.
The SCSI’s latest half-year report on the State’s property market indicated that close to two thirds of estate agents believed valuations “remain high”.
As a result, 82 per cent said they believed property prices were either expensive or very expensive while just 17 per cent believed they were “fair value”.
When asked where they believe we are in the market cycle, 77 per cent said prices are increasing but “will level off soon”, up from 43 per cent last year.
Property prices nationally have increased by 144.5 per cent since their post-crash trough in early 2013 with average purchase prices in Dublin now well over €500,000.
The single biggest factor driving prices, according to 75 per cent of respondents, was low stock levels. While new home completions rose to 33,000 last year, the society noted the estimated level of demand in the market might be closer to 50,000.
Other factors influencing price included economic growth; interest rates; the availability of credit, access to schemes supporting house purchases and changes in the level of immigration.
According to the report, a couple on a combined annual salary of €107,000 (which equates to the income of a garda and a staff nurse after 10 years of service) would struggle to buy in Cork, Galway and the Dublin commuter-belt counties of Meath, Kildare and Wicklow.
Assuming the couple want to buy a new three-bed semidetached home and have the 10 per cent deposit through the Government’s Help to Buy tax rebate, the report indicated they would only be able to buy in Meath and only then with the help of the Government’s other affordability initiative, the First Home scheme.
The prospective buyers would face financial shortfalls of almost €78,000 and €65,000 in Wicklow and Kildare, the report found, while the shortfalls in Cork and Galway were €13,000 and €8,000 respectively.
The only area where the couple’s combined salary roughly matched average prices in the area was in Meath where a €3,000 shortfall could be met through the First Home Scheme, which involves the State and participating banks taking a stake in the home.
Gerard O’Toole, vice-president of the SCSI, said the clear message from the report was the urgent need to increase supply.
On the affordability analysis, he said: “Last year our case study ‘couple’ could buy in three locations without the support of the First Home Scheme (FHS).”
“This year a new home is only affordable in one and that is with FHS support, so the widening affordability gap is a real concern,” Mr O’Toole said.
“While buyers with savings should be able to overcome the gap in Meath, Galway and Cork, new three-bed homes in Wicklow and Kildare remain totally out of reach for people on these salaries. In addition, there are thousands of people on lower salaries who will not be able to buy and will require support,” he said.
The SCSI’s report also included a rental affordability analysis for a family renting a three-bed semi or two-bed terraced home in the same five locations as above. For 3-beds, rents ranged from €2,139 in Meath to €2,475 in Wicklow.
Including reasonable living expenses of €3,504 for the family of four, this means that the estimated total expenses for a family renting in Meath would be €5,643 while it would be €5,979 in Wicklow, the report noted.
