Despite achieving a post-crash record of nearly 33,000 units of new-home completions last year, home prices have started to surge yet again. The most recent official statistics indicate a rise in year-on-year inflation to 5.4 per cent in January, a notable increase from the previous month’s 4.1 per cent. This also marks the highest pace of price growth since the start of 2023. Prices in Dublin, which had briefly dropped last year, have recommenced their steady yearly progression, recording a growth rate of 4.5 per cent in January.
Many estate agents and brokers are now suggesting that it might be necessary to adjust their initial expectations of a 3 to 4 per cent price increase this year. But what’s the reason for this sharp surge in prices?
An industry insider points to a burgeoning population, a robust jobs market, and the delayed impact of the Central Bank of Ireland’s relaxed mortgage lending regulations last year as key factors. The growth of real wages, which enhances purchasing power, also plays a major role. The central bank anticipates that over the next three years, the average worker’s real wages (nominal rises above inflation) will inflate by nearly 9 per cent.
Even though the European Central Bank, in response to the initial price surge, increased interest rates on 10 separate occasions, it is predicted to commence a series of cuts this year. These changes will be mirrored in the prices of mortgages.
Additionally, the government’s trio of help-to-buy schemes—comprising the official Help to Buy scheme, the First Home Scheme, and the Local Authority Home Loan initiative—are playing a significant role. Recent data indicates that in the last quarter of the previous year, the price of newly built homes saw a year-on-year rise of 9.2 per cent, twice that of the market’s overall headline inflation rate.
John McCartney, who heads up research at BNP Paribas Ireland, also expects that the growth of supply could taper off, or even drop this year, which could apply even more pressure to inflation rates.