Rising supply and rising interest rates to cool the real estate market

House price inflation will moderate later this year as increased supply and a likely rise in interest rates cool the market, Sherry FitzGerald said.

The state’s top real estate agent said “restoring forces” will begin to take effect as the year progresses, reducing house price inflation.

The company’s chief economist, Eoin Lynch, said there is a growing likelihood that the European Central Bank will start raising interest rates later this year, which will raise borrowing costs, thus dampening demand.

“Additionally, new listings on the used market are recovering towards pre-pandemic levels and the increased level of start-up activity over the past 12 months should help see some improvements in the level of supply. currently available,” he said.

“All of these factors have the potential to combine to reduce current high rates of inflation,” Lynch said.

In her latest quarterly assessment, Sherry FitzGerald, however, said increased levels of price growth are now widespread across the state and will persist through much of 2022 as supply shortages and price-related factors pandemic, such as remote work and increased cost savings, continue to fuel prices.

Based on a basket of listed properties, the company said headline inflation was 11.1% year-on-year in the first quarter and 9.6% in Dublin.

Supply horizon

Lower-value properties have seen the biggest increases in growth rate, although sustained price inflation is an almost ubiquitous trend nationwide at present, he said. He expected price growth to average 8% this year.

“It should be noted, however, that the supply horizon is currently much more favorable in Dublin, both in terms of housing starts and building permits granted, notwithstanding the potential effects of judicial reviews,” said Ms. Lynch.

“This will likely lead to continued divergence in price and rent growth inside and outside the capital, as seen of late,” he said.

In her report, Sherry FitzGerald noted that home sales last year had almost fully recovered to pre-pandemic levels, with the second-hand market the most active in more than a decade.

Excluding bulk sales and new homes acquired for social housing, there were more than 54,600 housing transactions in 2021 according to the government’s house price register. This was 18.1% more than in 2020, but still 1.2% less than in 2019.

Chief executive Marian Finnegan said the start of the new year had not slowed the exodus of owners from the rental market. “Without action, there will be further deterioration of an already dismal situation,” she said.