HOUSE BUYERS ARE now “stretched to the largest extent in over a decade”, with the average house purchase now almost eight times the average wage, according to the latest property price report from MyHome.ie.

The report, published this morning, found that the average household residential purchase in the third quarter of 2022 was €370,000, a 7.7 multiple of the average wage of €48,000.

This is the highest house price-to-income multiple since 2009, when prices of 8.1 times were reached.

However, the report states that this remains “well below Celtic Tiger era peaks”, and is now close to the UK multiple, where house prices are falling due to a surge in mortgage rates above 6%.

The report found that the annual inflation of prices slowed to 6% in the fourth quarter, while quarterly asking price inflation dropped by 0.4% nationally.

The median asking price for a home in the fourth quarter was €330,000, a reduction of 0.4% compared to the third quarter of 2022, but a 6% increase compared to the same period a year ago.

In Dublin, the median asking price was €436,000 in the fourth quarter, which is a fall of 0.8% compared to the third quarter. It is a 3.6% increase compared to Q4 2021 however.

While asking price inflation has dropped, just 3% of homes listed for sale in the fourth quarter saw asking price reductions, which demonstrates a resilience in the market.

Report author Conall MacCoille, the chief economist at Davy, said it appeared that the market had held up better than anecdotal evidence had suggested in 2022. 

“The number of vendors cutting their asking prices is still at low levels. Also, transactions in Q4 were still being settled above asking prices, indicative of a tight market,” MacCoille said.

“There are 15,000 properties listed for sale on MyHome.ie, an improvement from the beginning of 2022 but below pre-pandemic levels exceeding 20,000. The average time to sale agreed in Q4 was just 2.7 months, still close to historic lows.

“We expect transactions will exceed €21 billion in 2022, up 7.5% in volume terms on 2021.”

According to the report, the average mortgage approval in October was €280,600, up 4.3% on the year, with approvals continuing to exceed drawdowns, pointing to “excess demand in the housing market”. 

MacCoille said that even if mortgage interest rates rise to 4%, debt service ratios are unlikely to become stretched and there will be only a limited headwind to house prices.

However, he noted that already stretched valuations in Ireland could be exacerbated by the Central Bank’s decision to ease mortgage lending rules to four times’ income. He said this gave an upside risk to the 4% house price inflation prediction for next year.

Housing completions

According to the report, in Q3 2022 there were 7,544 house completions, with 27,800 homes being built in the last 12 months.
MyHome.ie says it expects the final number of houses completed in 2022 to reach 28,400. However, it predicts the number of new builds will fall to 27,000 in 2023.

“We expect a slowdown in completions because of recent signs that build cost inflation, combined with higher funding costs, may weigh on activity,” the report states.

It says there were just 1,841 houses commenced in October, the lowest figure since December 2021, bringing the running 12-month total down to 26,608.

It also says that just 2,347 apartment units were granted in Q3 2022, down 67% on the year. In contrast, planning permissions for 4,396 housing units were granted.

In a statement, Sinn Féin housing spokesperson Eoin Ó Broin TD said the report “makes for depressing reading” and that the Government’s failed housing policy is “driving house price inflation”.

“Minister Darragh O’Brien will not have met any of his affordable housing targets in 2023 and the targets were too low in the first place,” Ó Broin said.

“In many cases what is being delivered is far from affordable. Meanwhile his controversial policies such as the Shared Equity Loan scheme are contributing to house price rises.”

The Dublin Mid-West TD said the Government needs to “urgently” revise their affordable housing plans and provide local authorities and approved housing bodies with “increased capital and more ambitious targets”.

“They must also strip away the red tape that is slowing down the delivery of much needed affordable homes,” he added.

“Short of this, the Government’s housing crisis will continue to get worse in 2023.”