Although home prices have risen by almost a third in the past five years, auctioneers have noticed a significant slowdown in the market in recent months.
House prices rose by an average of €20,000 in the first half of this year – but the rate of increase then slowed in May and June, according to an analysis of sales data from auction houses and real estate agents.
Pat Davitt, executive director of the Institute of Professional Auctioneers and Valuers (IPAV), predicted that prices “will see a correction in some very hot areas” where they had recently returned to or even exceeded 2007 levels.
He said price growth could slow to around 2 percent for the rest of this year and be slightly lower in the first half of 2023.
He warned that further rate hikes could shut more potential buyers out of the market – which in turn would depress prices as fewer buyers could afford a mortgage.
IPAV’s home price barometer, released today, shows house prices rose by an average of about 10 percent in the first four months of this year before price inflation slowed in May and June. That cooling effect brought the six-month growth number to an average of 6.36 percent.
Subdued expectations played a role, with the practice of raising reserve prices almost disappearing from the market between May and June.
Until recently, someone who saw a neighbor sell for €400,000 might have added 5 percent to that amount when setting the reserve price for their own similar home. That’s not always the case now, Mr. Davitt said.
Concerns about rising mortgage rates and increased supply in some areas were also cited as contributing factors.
“I think we’ve seen the last 12 per cent increases per year until we get a better picture of what’s to come.
“I can see numbers of about 2 percent over the next six months and things flatten out a bit after that,” Mr Davitt said.
“Hot areas where house prices are high and people have to borrow significant money for mortgages that are getting more expensive [due to interest rate hikes]will be the first areas that we will see coming to par.
“We won’t see any declines across the market as some areas are still doing well – but there will be some areas where inflation could stop in the next six months.”
Sales data shows that the median price for a two, three or four bedroom house rose to €315,061 in the first half of 2022.
The report measures the realized prices for completed sales over the last six months and compares them to previous periods.
Year-on-year, prices rose by an average of €34,432 (12.3 percent) by the end of June. Real estate prices have risen by more than €77,000 (32.4 percent) on average since the study was first conducted in 2017.
The European Central Bank announced a 0.75 percent interest rate hike last week as it seeks to control inflation in the broader economy and cut spending. Mr. Davitt said further price increases could price some buyers out of the housing market.
“This may not be the only rate hike we’ll see over the next six months – and mortgages going up by €40 or €50 a month will be enough to put some people out of the market,” he said.
“That leaves fewer customers for less property. And that will change the market.”
He said parts of Dublin that have seen significant price growth over the past five years would most likely experience the earliest price corrections.
Price growth at various addresses in the capital ranged from a low of 2 per cent for a flat in Dublin 15 to a high of 9.5 per cent for a four-bed house in the south of the county in the first half of the year.
Dublin auctioneer Ray Cooke said prices have cooled since peaking around Easter.
He said improved supply in some parts of the capital, coupled with an increased desire to move to rural counties, has eased price pressures in certain areas.
“The cheaper areas are still doing well because there are more people there – more people willing to buy up to the €350,000 mark. But once you get past the €500,000 to €1m mark, there aren’t as many buyers – but there’s a similar amount of property available so you can see prices drop a bit there,” Herr said cooking
The most notable growth in the first half of this year was in the western part of the country.
Co Clare saw double-digit price growth for two- and three-bed homes, while four-bed homes rose nearly 10 percent. A three-bed house in Clare now costs 26 per cent more than last year.
In Galway City, the cost of a three bedroom house has increased by almost 13 per cent in the last six months. They now average €350,000 – more than 20 percent more than this time last year.
However, rural areas in County Galway saw much slower growth, averaging less than 4 per cent in the first half of the year for three and four bed homes.
IPAV President Gerry Coffey, an auctioneer based in Williamstown, Co. Galway, said demand was still outstripping supply – but people were taking a more cautious approach.
“The demand is there, but the phones have calmed down over the past few weeks. Things have eased up a bit,” he said.
“A lot of people are waiting”
https://www.independent.ie/irish-news/news/auctioneers-predict-price-correction-could-soon-affect-property-sales-41979503.html Auctioneers are predicting that a “correction” in price could soon impact property sales