House price growth to slow to 3pc nationally as rates rise and cost-of-living pressures hit purchasing power

The property market is expected to enjoy a calmer 2023 as mortgage interest rate rises and cost of living increases affect buying ability, according to a nationwide survey of estate agents

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The survey carried out for the Irish Independent by the Real Estate Alliance group has found that agents throughout the country expect prices to rise by just under 3% on average in the next 12 months. 

In Dublin city, which is currently experiencing small price drops in certain areas, agents anticipate modest increases of 3.6% across the year. 

This comes off the back of a 2022 which saw average house prices rise by 8% nationally and 5% in the capital – with feverish early year increases slowing down in the autumn and winter. 

Agents in more affordable north county Dublin are forecasting increases of 5% as the supply of new homes to the market is set to be unable to meet current demand. 

The area saw rises of 14% in the past 12 months, as buyers were driven by affordability, with prices increasing by 0.4% in the final quarter of the year.  

South County Dublin saw more manageable rises of 7% in 2022 and agents predict that this will continue at the same level in 2023. 

“Overall, we are looking at a more stable year, with none of the heated increases that typified the first half of 2022,” said REA spokesperson Barry McDonald. 

“At the moment, the market is driven by affordability, with the combination of a rising interest rate environment and increasing living costs informing buyer decisions. 

“Even with the easing of the Central Bank lending limits in the new year, applicants will still face tests around disposable income, and each percentage interest rate rise means that the ability to repay is tightened. 

“On the ground we are seeing longer selling times and fewer viewers for each property and rises restricted to more affordable areas as pricing becomes vitally important. 

“The raising of the First Home Scheme ceiling in most local authority areas will be positive for buyers, but the fundamental issue is one of supply. 

“The majority of REA members feel that the scheduled changes to the Planning Acts will have little effect on market supply in 2023, due to the time lag between legislation and enactment. 

“Demand is still outstripping supply both in the sales and rental markets and some buyers who currently have stalled their efforts to get on the property ladder will realise that purchasing is a better option given the high rent alternative.   

“Also, we will continue to see that houses needing modernisation will be challenging to sell as the shortage of tradesmen and high material costs put people off the ‘doer-upper’.” 

 A huge factor in the sale and purchase of any property in the capital will be energy efficiency – not just for lower running costs, but also the likelihood of lower finance costs for buyers, according to Winston Halnon of REA Halnon McKenna in Donnybrook. 

In Clontarf, REA Grimes predict that strong demand will remain for three-bed semis while homes in needs of full refurbishment will realign due to massive renovation costs. 

Agents in the four main cities outside Dublin saw prices rise by 9% in 2002 and are optimistic that the markets will grow again this year with rises of 10% predicted in Galway City (10% in 2022), 5% in both Cork (6% in 2022) and Limerick (10%) and 3% in Waterford which experienced 12% growth last year. 

It is a different matter in the commuter counties where zero growth is predicted in 2023 after price falls by -0.44% in the past three months. Agents are citing the interest rate environment. 

Prices rose by rose by 7% in the counties surrounding the capital in 2022, mostly fuelled by early year growth. 

The country’s large towns experienced 10% growth last year, with 1.2% in the final quarter, and REA agents say that this will continue throughout next year, albeit at a slower pace, with growth of 3% predicted. 

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