IRISH RESIDENTIAL MARKET REVIEW - AUTUMN 2020 - Seaspray Mortgages
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E-mail: research@sherryfitz.ie
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IRISH RESIDENTIAL
MARKET REVIEW
AUTUMN 2020
AUTUMN 2020
OVERVIEW
RESIDENTIAL MARKET
This report provides an overview of the key
developments in the Irish residential market.
Included in the report is a special in focus analysis
of the current resilience of Irish property values in
spite of the COVID-19 pandemic.
Watch the video here
2 Sherry FitzGerald | Irish Residential Market Review sherryfitz.ie
CONTENT
INTRODUCTION 4
IN FOCUS: THE RESILIENCE OF IRISH PROPERTY 5
VALUES
ECONOMIC OVERVIEW 8
TRANSACTION ACTIVITY 9
MORTGAGE ACTIVITY 11
PURCHASER PROFILES 12
BUDGET 2021 13
RENTAL MARKET 14
CONSTRUCTION ACTIVITY 15
OUTLOOK 16
sherryfitz.ie Sherry FitzGerald | Irish Residential Market Review 3
IRISH RESIDENTIAL MARKET | AUTUMN 2020
1
INTRODUCTION
COVID-19, and the societal and economic fallout from it,
remains the most overriding issue for the Irish housing market.
The economic ramifications of the necessary health measures in
place continue to encumber the market.
REDUCED SALES AND OCTOBER LEVEL 5
CONSTRUCTION LOCKDOWN
These ramifications are most apparent Following a notable uptick in the
in transaction and construction activity. transmission of COVID-19, the
Both aspects saw significant disruption to Government reintroduced stricter
both their output levels and lead-in factors, health protocols. The imposition of
affecting both current and future output. Level 5 restrictions for a six-week
As such, both indicators noted a decrease in period will inevitably have further
volumes, although not to the same extent adverse outcomes economically
as once feared. and for the housing market.
However, now that the sector
has previous experience coping
RESILIENT PRICE in such an environment, and that
PERFORMANCE construction and house viewings
can continue, it is hoped that the
fallout this time around can be
In contrast to much of the rest of the mitigated to a greater degree.
housing market, Irish property values did
not witness any degree of upheaval so far
this year, displaying a remarkable level of
robustness. In fact, over the opening nine
months of the year, average values have
risen slightly as supply shortages have
come even further to the fore.
4 Sherry FitzGerald | Irish Residential Market Review sherryfitz.ie
IRISH RESIDENTIAL MARKET | AUTUMN 2020
2
IN FOCUS:
THE RESILIENCE
OF IRISH PROPERTY
VALUES
It could be argued that the most Ireland Second-Hand Price Barometer,
Q3 2002 – Q3 2020
noteworthy aspect of the Irish
housing market at present is the
250.0
incredible resilience that property
values have demonstrated this year.
200.0
TROUGH to Q3 2020
+59.8%
Index Base = Q4 2001
150.0
100.0
After the implementation of the first national
restrictions in March due to COVID-19, it was 50.0
PEAK TO TROUGH
-57.2%
widely thought that a substantial drop in values
by year-end was inevitable, with a double digit fall 0.0
a distinct possibility.
11
02
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In defiance of this, values, to date, have remained Source: Sherry FitzGerald Research
buoyant. Despite the significant disruption to
the economy, which has resulted in a dramatic
increase in unemployment and slowdown in Despite the implementation of Level 5 restrictions
mortgage lending, property values have in fact nationally in October, values are likely to remain
noted a modest increase so far this year. This steady to the end of 2020 and for much of next
buoyancy has been a result of falling supply year. This is due to the fact that the ability to
levels, robust buyer demand, governmental replenish the already chronically low levels of new
income supports and an increase in savings. and second-hand stock will be inhibited further.
5 Sherry FitzGerald | Irish Residential Market Review sherryfitz.ie
IRISH RESIDENTIAL MARKET | AUTUMN 2020
According to the Sherry FitzGerald house price Average national prices, excluding Dublin, rose
index, the value of second-hand properties 1% in the third quarter and 1.3% since the start
nationally increased by 0.5% in quarter three and of the year. Price growth was particularly strong
in total has increased by 0.6% over the first nine in the West region, increasing 2.5%. All regions
months of the year. In contrast, average values across the country recorded a rise in prices in
fell -0.2% in Q3 2019, notwithstanding the much quarter three.
more favourable economic outlook at the time,
albeit prices were up 0.3% over the first nine Price resilience has been evident across the
months of 2019. market with all price categories having noted a
slight bump in value so far this year. Again, this
Remarkably, the rate of price growth at present is is a remarkable reflection of how depleted stock
stronger than it was at any point last year. Indeed levels are given that price growth had been so
Q3 2020, saw the fastest rate of quarterly growth varied across pricing groups in recent years.
in the country in over two years. Properties at the lower end of the price scale
increased at much faster rate than the rest of the
In Dublin, prices increased 0.2% in the quarter and market. This non-uniform movement in prices has
by the same figure in the year to date. In contrast, been a consequence of the more binding nature
prices in the capital were modestly decreasing of the macroprudential rules as property values
for much of 2019 and had fallen 0.5% over the increase. However, so far this year, growth has
opening nine months of the year. In the third been largely consistent across all price groups.
quarter, as it has done since 2018, price growth
outside of Dublin outpaced that of the capital.
Regional Price Growth
% GROWTH Q3 2020 % GROWTH YEAR-TO-DATE 2020
Source: Sherry FitzGerald Research
6 Sherry FitzGerald | Irish Residential Market Review sherryfitz.ie
IRISH RESIDENTIAL MARKET | AUTUMN 2020
Price Growth by Price Category
14.0%
12.0%
10.0%
8.0%
% Growth
6.0%
4.0%
2.0%
0.0%
Q3 2020 % Growth Year to Date Year-on-Year % Growth % Growth
% Growth % Growth Over 2-Year Over 3-Year
Period Period
-2%
Time Period
IRISH RESIDENTIAL MARKET | AUTUMN 2020
3
ECONOMIC
OVERVIEW
The Irish economy continues to face
GDP Growth and Unemployment Rate, 2000 – 2021(f)
the pressures and uncertainty of the
COVID-19 global health pandemic.
18.0
30.0
Due to a sustained spike in the spread of the virus 25.0
16.0
Annual % Change in GDP
Unemployment Rate (%)
in the autumn, the domestic government, as well 20.0
14.0
as governments around the globe, reimposed 12.0
15.0
stricter health measures in an attempt to reduce 10.0
10.0
the rate of transmission. With the vast majority of 8.0
the economy having fully reopened by the third 5.0
6.0
quarter of the year, the implementation of Level 0.0
4.0
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20 (f)
)
(f
20
5 restrictions in October will result in widespread
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21
20
-5.0 2.0
business closures again for another six-week -10.0 0.0
period. These measures are likely to carry a
*Real GDP (% Change) Unemployment Rate (%)
significant economic toll.
Source: CSO, DoF
Prior to reintroduction of these more stringent
health measures and in conjunction with the
release of Budget 2021, the Department of
Finance issued updated economic forecasts.
Here, the department, factoring in assumptions
of no widely available COVID-19 vaccine and no
interim UK-EU trade deal post Brexit, projected
GDP would fall by 2.4% this year before growing
1.7% 1.7% in 2021 and then returning to its pre-crisis
level by 2022.
The Department of Finance is Unemployment is expected to average just
under 16% for the year, following the loss of over
forecasting that the economy
300,000 jobs in 2020. Although, an increase in
will grow by 1.7% in 2021. employment next year should reduce the rate of
unemployment nationally to 10.3% in 2021.
8 Sherry FitzGerald | Irish Residential Market Review sherryfitz.ie
IRISH RESIDENTIAL MARKET | AUTUMN 2020
4
TRANSACTION
ACTIVITY
Quarter two, the latest quarter with accurate data available, saw an
inevitable slowdown in transaction volumes, as the original national
lockdown measures implemented in March impacted on the market.
Excluding block sales and new homes acquired period in 2019. Dublin noted the largest decline
for social housing, the Property Price Register in sales, 28%, year-on-year, with approximately
(PPR) shows that approximately 7,600 residential 2,100 fewer transactions recorded. However,
dwellings transacted in Q2 2020. This represented this fall was not out of line with other populous
a 42% fall on Q2 2019 and the smallest quarterly counties and other counites in the Mid-East. The
total in nearly six years, although this level of average fall in transactions across Louth, Wicklow,
reduction was expected. Kildare, and Meath was 25%, while Cork, Galway
and Limerick, recorded falls of 20%, 19% and 15%
For the first half of the year, approximately 18,700 respectively.
dwellings transacted, down 22% on the same
Housing Sales, Q2 2011 – Q2 2020
18,000
16,000
14,000
No of Transactions
12,000
10,000
8,000
6,000
4,000
2,000
3
5
1
4 11
1 12
3
2 3
3
4
4
20 4
1 14
5
2 5
12 5
6
6
2 6
Q 016
7
7
2 7
12 7
8
8
2 8
12 8
9
9
9
9
20 0
20
Q 201
Q 01
Q 201
Q 01
Q 01
Q 201
Q 201
Q 201
Q 01
Q 201
Q 201
Q 201
Q 01
Q 01
Q 201
Q 01
Q 01
Q 01
Q 201
Q 01
Q 01
Q 201
Q 01
Q 201
Q 201
Q 01
Q 201
Q 202
Q 20
20
12
2
2
2
2
2
2
3
2
3
4
2
3
4
2
3
4
2
3
4
2
3
4
2
3
4
1
2
3
4
1
2
Q
Q
Q
Total Home Sales New Home Sales
Source: PPR, Sherry FitzGerald Research
9 Sherry FitzGerald | Irish Residential Market Review sherryfitz.ie
IRISH RESIDENTIAL MARKET | AUTUMN 2020
The decline in transactions was largely consistent of properties sold for under €200,000 reflected
across both the new and second-hand sectors. the strong price inflation in that price category.
Comparing the first half of 2020 against the
equivalent period in 2019, shows that new Looking forward, sales volumes for quarter three
homes sales fell 26%, with approximately 1,000 are likely to remain reduced although not to the
fewer sales year-on-year. A total of 2,800 new same degree as seen in quarter two. Quarter
home sales were recorded in 2020 so far. Again, three also saw a notable increase in properties
sizeable reductions were recorded across the sale agreed across the market, reflecting the huge
country, particularly counties with a stronger new pent up demand in the system. This indicated
homes market, such as Dublin, Cork, and those in that sales in the final quarter of the year were
the Mid-East. Galway and Limerick, however, were on course to be the strongest quarterly sales
notable exceptions witnessing increases year-on- in over a decade. However, the impact of Level
year of 27% and 2% respectively. 5 restrictions may mean less of these sales
transition from sale agreed to completed than
In the second-hand market, sales reduced 21% previously envisioned.
in the period with every county recording a drop
in transaction volumes. Approximately 15,900
second-hand sales transacted nationwide, over Home Sales by Price Category
4,300 fewer than in 2019.
20%
The slump in sales was also proportional across 15% 14%
all sales categories mirroring pricing trends. 10%
All pricing categories witnessed volumes drop
between 19% and 24%. Prior to the outbreak of
5% 3%
2%
COVID-19, sales had been improving very strongly 0%
K
K
K
K
es
0
0
0
0
% Change
al
20
40
80
80
lSIRISH RESIDENTIAL MARKET | AUTUMN 2020
5
MORTGAGE
ACTIVITY
Mortgage approval data released by
4,621
the Banking & Payments Federation
Ireland (BPFI) highlights the strong
rebound in mortgage activity in A total of 4,621 mortgages were
approved in September 2020. A
September, with approvals returning
21% increase year-on-year.
to their pre COVID-19 levels.
In total, 4,621 mortgages were approved in value of mortgages drawn down in Q3 2020
the month, the highest volume in over a year. contracted. A total of 8,220 mortgages valued
It represented an increase of 19% month-on- at €1.96bn were drawn down in the quarter,
month and a 21% increase year-on-year. The signifying a 30% fall in volume and 26% fall in
recovery was led by first-time buyers and mover value compared to last year. Activity shrank
purchasers who saw volumes increase by 34% and across all cohorts in the market with drawdown
19% respectively in comparison to September 2019. volumes for first-time buyers, mover purchasers
and residential investment letting all decreasing
Reflecting the reduced levels of mortgage by at least 30%.
approvals in the summer, the total volume and
Mortgage Approval Volumes, Sept 2015 - Sept 2020
6,000
5,000
4,000
3,000
2,000
1,000
0
5
6
Ju 6
Se 16
ov 6
6
7
Ju 7
Se 17
ov 7
7
8
Ju 8
Se 18
ov 8
8
9
Ju 9
Se 19
ov 9
Ja 19
ar 0
Ju 0
Se 20
0
5
-1
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Ja
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M
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M
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N
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N
M
First Time Buyers Mover Purchasers Total Mortgage Approvals
Source: BPFI
11 Sherry FitzGerald | Irish Residential Market Review sherryfitz.ieIRISH RESIDENTIAL MARKET | AUTUMN 2020
6
PURCHASER
PROFILES
Despite the current upheaval in Profile of Purchasers, Year-to-Date 2020
the market, the makeup of buyers
Ireland* Dublin
has remained broadly consistent
Owner Occupier 80% 83%
in the year, with owner occupiers Investment 12% 11%
remaining the most prevalent. Additional Residence 7% 5%
Other 1% 1%
This cohort accounted for 80% of all purchasers
who bought through Sherry FitzGerald in the first
Source: Sherry FitzGerald Research
nine months of the year, with first-time buyers *Ireland figures include Dublin
accounting for 54% of all owner occupiers.
The withdrawal of investors from the market has
Vendor Analysis, Year-to-Date 2020
also remained consistent accounting for just 12%
of purchasers with Sherry FitzGerald, while 32% of
vendors were selling investment properties. Other Relocating Abroad Bank Repossession
Smaller House Selling Investment
3%
4%
8%
32%
9%
14%
15% 15%
Executor Sale Larger House
Relocating in Ireland
Source: Sherry FitzGerald Research
12 Sherry FitzGerald | Irish Residential Market Review sherryfitz.ieIRISH RESIDENTIAL MARKET | AUTUMN 2020
7
BUDGET 2021
The housing related measures introduced in Budget 2021 although
broadly welcome, suffered slightly from a lack of scope and indeed clarity.
Firstly, the retention of the expanded Help to undoubtedly positive, a longer time frame would
Buy scheme is to be commended. To date, the have been more beneficial and provided greater
scheme has assisted over 20,000 first-time reassurance to both buyers and suppliers.
buyers across the country in building or buying
a new home and has also acted as a spur to the Similarly, the increased provision of €500m in
construction industry, helping to increase supply. funding to help in the delivery of 9,500 social
Furthermore, since July when the maximum housing units is also needed. As is the additional
relief that applicants can avail of was extended funding for the Serviced Sites Fund. The
to €30,000, there has been a definitive pick up Affordable Purchase Shared Equity Scheme for
in enquires and the measure provided some first time buyers is also welcome, however, further
much-needed reassurance to the industry. While, clarity on how the scheme will operate is needed.
extending the measures to the end of 2021 is
13 Sherry FitzGerald | Irish Residential Market Review sherryfitz.ieIRISH RESIDENTIAL MARKET | AUTUMN 2020
8
RENTAL MARKET
The impact of COVID-19 on the compared to 4.9% for renewing tenancies. Annual
rental growth for renewing tenancies has now
rental market has also been far outpaced that of new tenancies for five successive
quarters, reversing a trend which had seen rents
reaching. Rents fell slightly in
for new tenancies increase at faster rate in the
quarter two, with rental growth preceding twenty-one quarters.
having already begun to soften Although the supply of rental properties has
prior to COVID-19. increased since the onset of the pandemic,
particularly in the urban areas, this uplift is likely
to be transitory, with supply levels expected to
Consequently, annual rental growth to Q2 2020 recede once workers begin to return to the office.
stood at 1.8% according to the Residential Corresponding to this uplift in supply, the total
Tenancies Board (RTB), the lowest rate of growth volume of tenancies registered with the RTB fell in
in seven-and-a-half years. quarter two. However, more worryingly the rate at
which private landlords were leaving the market
This moderation in rental growth was most
accelerated. Over 5,500 private landlords exited
pronounced in Dublin. Rents remained unchanged
the market in the year to Q2 2020. Given the
in the capital in the twelve-month period, whereas
prolonged mismatch between investors entering
the rest of the country recorded growth of 3.4%.
and exiting the market this is likely to further
There is also a divergence in growth between
compound supply shortages once the working
new and renewing tenancies. The annual rate of
environment becomes more normalised.
growth to Q2 2020 for new tenancies was 1.7%,
RTB Rent Index, Q4 2007 – Q2 2020
140
130
120
Index Base = Q4 2007
110
100
90
80
70
60
10
13
15
17
19
07
08
08
09
09
0
11
11
12
Q 12
13
14
Q 14
15
16
Q 16
17
18
Q 18
19
20
20
20
20
1
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
2
2
2
2
2
4
2
2
4
4
4
4
2
4
2
4
4
2
4
4
4
2
2
4
2
4
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Dublin Index GDA (excl. Dublin) Index Outside GDA Index
Source: RTB
14 Sherry FitzGerald | Irish Residential Market Review sherryfitz.ieIRISH RESIDENTIAL MARKET | AUTUMN 2020
9
CONSTRUCTION
ACTIVITY
Due to restrictions on construction Nevertheless, with the industry not operating at
full capacity for the remainder of the year output
sites between the 28th of March will remain below 2019 levels. Current industry
estimates suggest approximately 16,000 units will
and 18th of May, there was an
be built this year. This would signal a 15% fall on
inevitable drop off in construction. 2019 and would see 10,000 fewer units built than
had been forecasted at the outset of the year.
In total, the CSO recorded 3,290 new dwellings
constructed in quarter two. This represented a
32% fall year-on-year and the lowest number of
new dwellings competed since Q2 2017. However,
considering sites were completely shut down for
over half of the quarter and then operating at a
reduced capacity for the remainder, the fall out
was not as large as previously anticipated.
Housing Construction, 1970 – 2020(f)
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
70
74
76
78
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
72
12
14
16
20 18
)
(f
20
20
20
20
20
19
19
19
19
19
19
19
19
19
19
19
19
19
20
19
20
19
20
20
20
20
ESB Connections CSO New Dwelling Completions
Source: DoHLGH, CSO
15 Sherry FitzGerald | Irish Residential Market Review sherryfitz.ieIRISH RESIDENTIAL MARKET | AUTUMN 2020
Since the initial lockdown of the country in March, COVID-19 has brought
an unprecedented shock to the economy and to the country at large.
This economic fallout has also burdened much of the housing market.
10
OUTLOOK
This has been evident in reduced sales volumes
and construction output in comparison to
previous years. At odds with much of the
market, however, property values have remained
surprisingly buoyant and indeed have recorded a
slight increase so far this year.
As it has since the onset of COVID-19 in March, the
outlook for the housing market remains broadly
dependent on the trajectory of the virus and its
transmission within the community. As such, the
recent increased prevalence of the virus requiring
the reimposition of stricter health measures in
October will impact on the recovery of the market
in the final quarter of this year and going into
2021.
With it very likely that the construction industry
will be operating at a reduced capacity for the
remainder of 2020 and much of next year also, the
already insufficient stock levels will be depleted
further, prolonging supply shortages in the
market in the near-term. Although it contained
some welcome measures, Budget 2021, therefore
represents a missed opportunity to take very
significant action to combat this inadequacy in
supply. With supply levels set to remain at these
acute lows for the time being, and income support
measures set to remain in place, a corollary of this
should see the current rigidity in prices continue,
temporarily at the very least.
16 Sherry FitzGerald | Irish Residential Market Review sherryfitz.ieCONTACT DETAILS
AUTHORS
Marian Finnegan Eoin Lynch
Managing Director Economist
Residential & Advisory Research
+353 (0) 1 237 6341 +353 (0) 1 237 6474
marian.finnegan@sherryfitz.ie eoin.lynch@sherryfitz.ie
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