Why prices are continuing to rise in Ireland.
Well, really it’s simple economics, supply and demand, and the fact that Ireland’s housing market is not a normal market.
Nationally, the average asking prices rose by 8% in 2016, similar to the 8.5% seen in 2015. In a healthy housing market, extra demand is offset by more supply, so the real price of housing should be stable, once general inflation is considered. In Ireland, general inflation has been effectively zero, so house prices should be stable, but they are not, rising by 13% in Galway city in 2016.
So, Ireland is currently in a position where house prices are rising faster than prices in the rest of the economy. This is not sustainable, but the latest indications are that this high rate of inflation is embedded in the market, due to strong demand and weak supply.
In the initial census results, the country has added 75,000 new households from 2011 to 2016. Yet only 17,000 house were built in that time. Or to put it another way for every 10 new households only 2 houses were built.
Effectively Ireland needs between 40,000 and 50,000 new home built each year, when you factor in new households created, migration, net immigration and the fact that about 10,000 houses become derelict each year. Ireland is no where near having this number built at present. Unless Government can soon bring in new incentives to encourage the building of new homes, the situation will continue for some time to come and house prices will continue to rise.
The local situation in Connacht/Ulster is interesting. The average asking price in Connacht/Ulster rose by 12% in 2016. But almost all of that came in the first six months, with prices largely stable since June.
There were fewer than 6,000 properties for sale in Connacht/Ulster in December, the lowest since January 2007, the first month figures were compiled.
Just under half (48%) of all properties in Connacht/Ulster find a buyer within four months. The average transaction price in Connacht/Ulster is now 7% above the original list price, having been in line with the list price a year ago.
Source the report.