Rents and property prices will rise by 8 per cent in Ireland this year, the Society of Chartered Surveyors Ireland (SCSI) has said.
The SCSI prediction comes a day after global ratings agency Fitch suggested Irish property prices would rise 10 per cent in 2018, slowing to 5 per cent in 2019.
SCSI’s annual outlook of the property market suggested that rents will rise 8 per cent despite the introduction of rental caps in Dublin and Cork, with most surveyors suggesting the cap has forced a significant number of landlords to exit the market.
On the continuing house price inflation, John O’Sullivan from the SCSI’s residential agency group said surveyors were concerned at the low level of housing bring built for middle-income earners. He added that many believe this is because it is simply not economically viable to build affordable new homes in urban areas, where demand is highest.
The rising price of development land, which is expected to increase by 11 per cent this year, was singled out as one factor leading to price increases.
The report also found that while the number of planning permissions increased by 15 per cent in the first three quarters of 2017 compared with the same period in 2016, demand is expected to continue to outstrip supply.
Separately, Fitch said several days ago that properties would continue to become less affordable for Irish buyers this year on the back of house price inflation and low wage growth.
Of the 22 markets analyzed by Fitch, Ireland was the only one in which property prices are expected to rise in double digits.
More than 400 estate agents and chartered surveyors took part in the survey in late 2017.
The report’s headline concludes that surveyors expect residential property prices to increase by 8 per cent in 2018, with a slightly lower 7 per cent rise predicted for Munster.
This is not great news for the growing glut of aspiring property owners failing to get a foot on the property ladder.
Median house prices for 2017 in Munster were at €163k, compared to €325k in Dublin and €129k across Connacht/Ulster.
John O’Sullivan of the SCSI’s Residential Agency Group claims the 8 per cent forecast is probably conservative and conditions are not sustainable in the long term.
The lack of affordable housing for middle income earners is highlighted as a particularly problematic issue. Buyer competition, population growth and continuing economic expansion are cited as some of the factors driving price rises.
A practically unanimous 92 per cent of chartered surveyors say sellers’ price expectations have increased, up from 86 per cent in 2017.
Residential development land prices were quoted as one of the main reasons for unaffordable housing in the past cycle, this one appears no different.
Prices rose by 14 per cent in 2017 with a further 11 per cent increase expected in 2018.
O’Sullivan concludes that a 25 per cent increase in two years is simply not sustainable and one has to ask if the changes made to the vacant site levy tax in the budget will be sufficient.
Surveyors believe the cost of development land means it is not economically viable to build affordable new homes in urban areas, where demand is highest.
The ‘Help to Buy’ scheme is believed to be boosting supply in areas outside Dublin, but not in the capital. On a more positive note, the number of planning permissions increased by 15 per cent in the first three quarters of 2017.
Almost half of residential surveyors in Munster say they will be marketing new schemes in 2018 — a rise of 10 per cent on last year.