House prices could grow by as much as 8 per cent in 2022 as supply constraints, exacerbated by the pandemic, continue to weigh on the market, the State's largest estate agent, Sherry FitzGerald, has warned.
In its latest quarterly report, the company said “unexpectedly robust” demand was continuing to fuel price growth.
It said second-hand homes had – according to its own data – increased in value by 9.6 per cent in 2021 while sales activity reverted to pre-Covid levels with 39,100 purchases recorded in the first three quarters.
The company noted the volume of properties valued at over €1 million that sold during the year was up 46 per cent, while there was a sizeable increase in activity in rural locations. Counties such as Longford, Mayo and Leitrim all recorded house price growth of 20 per cent or more compared to 2019, it said.
Transaction numbers
“In areas where the new homes market is more prominent, such as Dublin and its neighbouring counties, overall volumes lagged slightly behind 2019, as fewer developments were brought to market due to public health restrictions,” it said, predicting that this would be a temporary feature of the market.
Looking to the year ahead, managing director Marian Finnegan said the company expected house completions to increase to 26,000 in 2022, with transaction numbers climbing to 58,000.
"The combination of both these factors should yield a more moderate rate of price inflation, with inflation in Dublin anticipated to be in the region of 4-5 per cent, while overall inflation in Ireland could be higher at 6-8 per cent," Ms Finnegan said.
On the rental side, she said 2021 saw significant disruption and dysfunction in and this looked set to continue in 2022.
Rental hike
“The disparity of two investors exiting to each new entrant continued, stoking heightened rental inflation in the year,” she said.
“With limited scope of new rental supply on the horizon in many locations outside of Dublin, rental availability will be a significant bone of contention in 2022,” Ms Finnegan added.
Many had expected property values to fall as a result of the pandemic but a number of factors, including the ongoing shortfall in supply, increased savings and remote working, have led to an acceleration in prices.
The latest official figures from the Central Statistics Officesuggest house price inflation was running at 13.5 per cent in October, the strongest level of price growth seen in the market since June 2015.
Sherry FitzGerald’s report indicates owner-occupiers remain the most active purchasing cohort in the market in 2021, accounting for 79 per cent of all second-hand home purchases made through the company, with first-time buyers comprising over half of all owner-occupiers.
