The pace of resale property price inflation in Dublin accelerated in the first three months of the year with second-hand homes selling for 6 per cent above the asking price on average, a new report from DNG Group has indicated.
Buoyant demand coupled with low levels of available housing stock continue to push up the price of second-hand homes, “particularly at the entry level”, the property adviser said on Friday.
Resale property prices increased by 1.9 per cent in the first three months of 2024 from the fourth quarter of 2023, DNG said. It means the rate of price increase has more than doubled from 0.9 per cent over the same period in 2023.
On an annual basis, prices across all locations in Dublin have increased by an average of 4.3 per cent over the past 12 months, according to the report, compared with a rate of 2 per cent in the same period last year. Prices jumped 3.3 per cent in the 2023 calendar, so the pace has picked up again in the first quarter of 2024.
“Competitive bidding for available properties due to a lack of stock has resulted in prices being pushed upwards, particularly for properties in walk-in condition with good energy-efficiency ratings,” said Keith Lowe, chief executive of DNG Group.
“Our research shows that, during the first three months this year, sales of homes across the capital were, on average, agreed at 6 per cent above the quoted asking price, indicating the strength of demand in the market at the present time.”
The strongest rate of price growth was recorded in west Dublin in the three months to the end of March, DNG said. Prices there increased by 3.7 per cent in the first quarter compared with rates of just 1.6 per cent on the southside of the city and 1.4 per cent on the northside.
Paul Murgatroyd, director of research at DNG, said it was “no surprise” to see prices increase in west Dublin, where stock levels are low but first-time buyers are active at the “starter home level”.
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“Strong demand, particularly at the entry level to the Dublin market, combined with the very low stock of available second-hand homes for sale, resulted in an uplift in prices during the first quarter of the year, as buyers competed for the limited supply of homes for sale,” he said.
“First-time buyers remain the most dominant players in the resale homes market at present, accounting for over half of purchases in the second-hand market during the first quarter of the year in the capital.”
Apartment prices, meanwhile, jumped 1.3 per cent in the first quarter, the largest quarterly increase in this segment since 2022, DNG said.
Separate research published by property agent Sherry FitzGerald earlier this week indicated that second-hand house prices had jumped by 2 per cent nationally between January and March and were up by 5.1 per cent on an annual basis. In January, just 11,050 second-hand properties were listed for sale, according to the report, representing 0.6 per cent of the entire private housing stock in Ireland.
House price inflation accelerated again in the first quarter on the back of what the State’s largest estate agent said was “a chronic lack of supply in the second-hand market”.
Sherry FitzGerald said asking prices for second-hand homes nationally rose by 2 per cent between January and March and were up by 5.1 per cent on an annual basis. This compared with annualised growth of 3.6 per cent this time last year.
In the capital, asking prices for second-hand homes rose at an even swifter rate of 2.1 per cent during the quarter, while price inflation outside Dublin increased by 1.9 per cent.
“One of the key factors sustaining this strong price growth is a chronic lack of supply in the second-hand market,” Sherry FitzGerald managing director Marian Finnegan said.
In January, just 11,050 second-hand properties were listed for sale “representing a mere 0.6 per cent of the entire private housing stock in Ireland, with rural and regional Ireland disproportionately affected,” she said.
The company has been predicting house prices nationally to rise by 2-3 per cent this year. Ms Finnegan said an extreme shortage of stock in the first quarter drove an acceleration in asking prices but “we expect the pace of inflation to moderate somewhat” as more supply comes on stream.
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Sherry FitzGerald’s latest quarterly report on the residential market here noted there were almost 60,200 housing transactions in 2023 (excluding block sales and homes acquired for social housing), up 1.1 per cent on the previous year.
Activity in the second-hand market saw a minor reduction, with about 49,650 units sold in 2023, a reduction of 50 units transacting when compared with 2022, it said.
The company said the shortage of second-hand stock in rural counties such as Longford, Kerry, Roscommon and Donegal saw transaction activity in the second-hand market decline by more than 8 per cent.
Conversely the company said the new homes market witnessed a modest uptick in transaction activity last year, with 10,550 transactions recorded in the year, a 7 per cent increase on the previous year, with Dublin and its commuter-belt counties Kildare, Meath and Wicklow accounting for more than half (56 per cent) of transaction activity.
In its report, Sherry FitzGerald again highlighted the exodus of landlords from the market, noting that in the first quarter just 12 per cent of purchasers of second-hand homes with the company were investors, while 35 per cent of vendors were investors selling their properties.
“While it is anticipated that house completions levels will improve again this year, the desired V-shaped recovery in supply has not occurred,” Ms Finnegan said.
“As such the deficit in supply is likely to persist. This shortage in new supply has had a ripple effect, adversely affecting the supply of other properties to the market. This pattern is particularly noticeable in more rural locations, as is evidenced in contracting transaction volumes,” she said.
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It said “myriad headwinds impeded activity”, including higher interest rates, while lay-offs by tech companies and the increased popularity of remote working pushed up vacancy rates in the office sector.
Just 126 commercial deals closed over the year, with only 2pc of these valued at €100m or more, compared to 6pc of that value in both 2021 and 2022. The decline was to be expected, given the higher cost of borrowing, the estate agent pointed out.
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A report by Lisney earlier this week found that the headline office vacancy rate across Dublin at the end of last year was almost 16pc – the highest level since 2013. The property-advisory company noted that the number of staff returning to the office is now growing, which should provide businesses with greater certainty on their space requirements.
Apart from high interest rates and changing occupier trends, the cost associated with implementing sustainability measures will mean a subdued investment sector for much of this year, Lisney predicted.
“From an investment point of view, the office sector was the least active of the four key market sectors, with changing occupier requirements since the pandemic, and concerns about some buildings (BER of B3 or lower) becoming stranded assets – too modern to financially justify upgrading works but not meeting required standards – acting as key challenges,” Lisney reported.
“In addition, with no new office buildings due in 2026 and beyond, this supply will not meet demand for A-rated/zero-emission buildings arising from occupiers’ 2030 ESG commitments.”
Lisney said the influence of ESG criteria (environmental, social, and corporate governance) on market demand is only going to intensify. EU directives will continue to tighten, in order to achieve a climate-neutral building stock by 2050.
‘Investment property may experience a recovery in the second half of the year’
“Failure to meet sustainability criteria will result in a devaluation of assets,” it said. “This is already beginning to materialise.”
Among the bigger commercial deals completed in 2023 were Pontegadea, a Spanish firm, paying just over €100m for a group of 120 luxury rental apartments in Dublin docklands.
M&G Real Estate, a London firm, bought a buy-to-let apartment building in Donnybrook for just under €100m.
Among the other noteworthy transactions was the purchase of 156 apartments around Dublin for €75m by US investors Franklin Templeton.
Sherry FitzGerald’s analysis is that the investment property market may experience recovery in the second half of the year, when the ECB is likely to have cut lending rates.
Ross Harris, director of commercial and residential investment at Sherry FitzGerald, said: “Looking to this year and beyond, with ECB and Fed base rates expected to reduce in mid/late 2024, expectations are that investment activity will increase to more normalised levels towards the back end of the year.
“Certainty from the Government around policy and intervention could also assist in driving investment activity across all asset classes.”
Investment in the Irish commercial property market fell to just more than €2 billion last year, down from €4.7 billion previously and the lowest level seen in a decade, as higher interest rates and remote working dampened investor appetite, according to a report by estate agent Sherry FitzGerald.
The volume of transactions was also below average, with 126 deals closing during the 12-month period while 2 per cent were valued at €100 million or more compared to 6 per cent in the previous two years.
This was “not surprising” given the higher borrowing cost environment, the company said.
Investor spending on both office and residential assets fell substantially in 2023 to reach about 35 per cent of the levels recorded for 2022.
“Continued severe shortages of accommodation has sustained interest in the residential market, although the impact of rental caps and higher interest rates is taking its toll,” Sherry FitzGerald economist Jean Behan noted.
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Despite the downturn, residential assets still represented the largest proportion of turnover in the sector at 28 per cent, or €563 million.
There were two large deals at the start of the year. Spanish firm Pontegadea paid €101 million for a portfolio of 120 luxury rental apartments in Dublin’s south docklands while London-listed M&G Real Estate purchased a buy-to-let apartment building at Eglinton Place in Donnybrook for €99.5 million. In the final quarter, US investor Franklin Templeton acquired a social housing portfolio of 156 apartments in various locations across Dublin for €75 million.
“It is important to note that there have also been numerous social housing acquisitions by State-backed bodies during the year but, given these transactions are largely off-market and not publicised, they are not reflected in these figures,” Sherry FitzGerald said.
The value of office assets totalled €384 million for the year, representing just under a fifth of total turnover, the lowest level on record for this asset class.
The company cited reduced space requirements following tech lay-offs earlier in the year and the impact of hybrid working, resulting in higher levels of vacancy, particularly of lower quality accommodation.
On a more positive note there were increases in both industrial and logistics, and retail assets, when compared to 2022 levels.
“A total of €2 billion [was] transacted during 2023 which is significantly down on previous years,” said Ross Harris, Sherry FitzGerald’s head of commercial and residential investment.
“Approximately 33 per cent of this year’s total traded in Q1, suggesting a significant level of 2023 trades were legacy transactions from 2022.
“Looking to this year and beyond, with ECB and FED base rates expected to reduce in mid/late 2024, expectations are that investment activity will increase to more normalised levels towards the back end of the year.
“Certainty from Government around policy and intervention could also assist in driving investment activity across all asset classes.”
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