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House price inflation at 5% by third quarter despite coronavirus impact

Despite the effect of Covid-19 on the economy and employment, house price inflation has returned to 5% by the third quarter of this year, according to a Myhome.ie report. The report also suggests that imbalances and delays may continue until 2031.

It is a decade before Ireland’s housing market finds a balance between supply and demand, as claimed by the government as it prepares the latest housing measures as part of its 2021 budget.

In a budget pre-presentation this week, the Society of Chartered Surveyors Ireland (SCSI) claims that a 10-year housing plan or roadmap is needed in all areas, including affordable and social housing.

According to SCSI:

●Government must address affordability issues and the cost of new house building

● Land and housing tax treatment should be reviewed

● The land development agency and local authorities should be persuaded to make further use of compulsory purchase orders for community housing using private sector developers

● The government should launch a large-scale public housing program through local authorities to reduce construction costs over the next two years.

It says the manufacturing sector will not be as active next year as it is this year due to the crises associated with Brexit and COVID-19.

“Construction tender inflation is therefore likely to decrease and value for money on construction projects should follow,” SCSI said. 

It also points to the need to increase resources for a retrofit plan for 500,000 homes in the coming decade.

Housing prices have been rising every year for the past several years. SCSI says this gives funders the courage to invest in new projects which ultimately to get new homes into the market.

“As we enter a period of stagnating house price growth and possible house price deflation, intensified efforts are required to tackle the high costs of delivering new homes to ensure that new product is fit for the market in which it is being sold.”

However, the expectation that house prices will fall has not yet been reflected by the latest estimates.

In the third quarter report released today, the property website Myhome.ie, along with Davy, reports an increase in inflation demand. This is the highest level since the first quarter of 2017, ranging from 5.1% nationally to €282,000, the report said. And by about half that in Dublin, by 2.7%, Dublin’s adjusted average of €386,000, due to persistent demand and supply constraints, worsened by the spring lock-down impact on supply.

COVID-19 may have “disrupted the usual seasonal pattern of the housing market and may have flattered the annual comparison,” so we are not facing another property bubble, said Davy chief economist Conall MacCoille.

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