LAST UPDATE | 6 Sep 2022

THE BANKING AND Payments Federation Ireland has warned that house prices are likely to increase in the coming months, despite a “significant” increase in housing supply.

With an increase in residential property prices of 14.1% in the year to June, the residential property price index is now at similar levels observed at its peak in April 2007.

In its latest Housing Market Monitor for Quarter Two of 2022, the BPFI notes that a “continued supply of housing is required to moderate price increases and improve affordability”.

Latest CSO figures show that the number of housing completions in the second quarter of this year was 7,654, which is a 53.4% increase on the same quarter in 2021. 

This figure is also up by 58.8% when compared to the same period in 2019, prior to the pandemic. 

Speaking on the Housing Market Monitor, BPFI Chief Executive Brian Hayes, said “the expected increase in supply levels over the next two years should help to meet the demand we are seeing as a result of strong employment levels and income increases”.

Sinn Féin’s housing spokesperson, Eoin Ó Broin, said that the government must use Budget 2023 to ramp up direct investment in the delivery of affordable homes.

Ó Broin said house prices rose by 14% in the last year according to June’s CSO Property Price Index and that they are now above their Celtic Tiger era peak.

“Today, the Banking and Payments Federation have released their Housing Monitor. They believe that house prices are likely to continue to increase in the time ahead.

“Meanwhile, government are failing to deliver genuinely affordable homes. This year, just €60 million was allocated to deliver up to 500 affordable purchase homes by local authorities. Not only is this target far too low, the government are not even meeting this target – with just 15% delivered by July.

“Other initiatives, such as the expanded Help to Buy Scheme and the Shared Equity Loan Scheme are pushing house prices up even further.

“Government must use Budget 2023 to ramp up direct investment in the delivery of affordable homes. The Affordable Housing Fund must be dramatically increased to deliver at least 4,000 affordable purchase homes at genuinely affordable prices.”

“Employment and income trends 

The CSO’s latest Labour Force Survey revealed that employment in the second quarter of this year was at its highest rate since the current series of records began, with over 2.5 million people working. 

Meanwhile, average weekly earnings were just under €872 in the second quarter, which is a 21% increase on earnings in the same period in 2017. 

Brian Hayes said “it is important to note that the main driver of the significant increase in property prices in recent years has been the lack of supply of new homes as opposed to lending growth”.

He added that these “economic fundamentals, such as employment and average incomes, are the key factors supporting solid demand for mortgages right now”. 

The average mortgage drawdown value has also increased in unison with the increase in average residential property prices. 

BPFI figures show that mortgage drawdown values increased by close to 37% for the first half of the year when compared to pre-pandemic levels, while volume of activity increased by around 16%. 

Meanwhile, the average First Time Buyer mortgage drawdown rose by 13% over the past year to €263,312, the highest level since the BPFI data series began in 2003.

Hayes said that the “Irish banking sector has the capacity to provide further sustainable mortgage lending”.

According to the latest Daft.ie Sales Report, the average listed price nationwide is up almost 10% on the same period last year, to €311,874.

The BPFI Chief Executive has cautioned that it is “critical that housing supply needs to continue to increase in order to moderate house price increases and enhance affordability”.