With reference to Housing Costs likely to remain elevated in Medium Term by Ali Uğur.
The housing costs look to remain elevated with no promise of decreasing throughout the rest of 2017. With increases in the average price of property at 10.7% from 2016 to February 2017 according to the CSO residential property price index.
Concerning rental properties, the rental inflation is 13.4% for the first quarter of 2017. This being the second highest level since 2002. This is in part from the supply and demand issue here in Ireland for rental property. The May 1st, 2017 there was fewer than 3,100 rental properties available to rent. This is the lowest on the record, according to the Daft.ie report.
Looking on the bright side, we are seeing an 18% yearly increase in completed residential properties with 14,932 completed in 2016. This is in response to trying to meet the increase of demand in the housing market. A majority of these, however, are one-time builds and can’t predict any yearly continuous builds. The breaking of grounds for new residential homes has also significantly increased with 57% increase from 2015 to 2016 in Dublin.
As far as mortgage drawdowns, quarter after quarter there was an increase compared to the same quarter as the previous year. According to the most recent BPFI Mortgage Drawdown report, quarter 1 of 2017 was at 1.4 billion, 40% increase as the same quarter in 2016. Concerning volumes of the loans, 7,000 mortgage were drawn down in quarter 1 in 2017 with a 27% increase of quarter 1 of 2016.
With regards to reaching the housing market equilibrium, research has shown the demand for housing in Ireland is between 25,000 and 30,000. Calculating with a 15% increase growth rate in building, by the year 2021 Ireland will reach output levels of 30,000 to reach the market equilibrium. This is not accounting for the growth of the demand for the next 5 years so don’t hold your breath. What this means? More pressure on the property prices and rent prices for the future.
It is said even when the supply level reaches the equilibrium of housing demand, there is not likely to be a large decrease of price pressure for housing costs. This can leave you counting on rents much higher and staying there for quite a while. Pertaining to the housing purchase market, the supply level will determine the price in the future.