The Banking and Payments Federation of Ireland has issued a warning that, despite a “significant” increase in housing supply, home prices are expected to rise in the coming months.
The residential property price index has increased by 14.1% in the year to June, matching levels seen at its high 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”.
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”.
News source: The Journal