Growth in the construction sector slowed down slightly in December according to the Purchasing Managers Index, but there is no doubt in the residential sector new home commencements have increased steadily in the 18 months.
The primary reason for this is there is now a stable supply of new home buyers who can attain mortgage approval for houses in the €250,000 – €400,000 price bracket.
The Property Price Register shows that the number of new house transactions have increased, progressively since 2013, with 1,718 in that year in Dublin, Kildare, Meath and Wicklow. The figure increased to 2,393 in 2014, 3,057 in 2015 and the indications show it will reach in the order of 3,500 when the final tallies are in for 2016.
On the finance side of the residential market there were over 29,498 mortgages drawn down in 2016 up from 27,324 in 2015, a steady 8% increase over the 12 months.
Nationally property price inflation has risen 8.6% in 2016 and remains at 31.5% below the peak of 2007. In Dublin, residential property prices increased by 5.7% in the year to December 2016, whereas apartments increased 7.9% in the same period.
With transactions, mortgages draw downs and house prices increasing at a balanced pace we may now see new housing start-ups increase to a level which will allow the 25,000 homes required be completed annually.
We witnessed the recovery start in late 2013 with sentiment changing in the market like the flick of a switch. This instantly saw the return of buyers, albeit with limited access to mortgages and very cautious about purchasing a home in a new development. They had many worries and often voiced their reservations. Firstly, would the developer have sufficient funds to construct the scheme or was there a danger he might go into receivership during construction. Secondly, would they be left in a partially completed “ghost estate” as happened many developments.
Now just over three years on and with demand steadily increasing, the intervention of the government with the “help to buy” scheme in Budget 2017 and the Central Bank’s lending rules changed to allow the first time buyer borrow 90% we have noticed the new home (and second hand) buyer purchasing their home with a degree of confidence. A necessary feeling as you are making possibly the biggest purchase of your life.
Demand will influence the supply and with the Central Bank keeping a watchful eye on credit being released to home buyers, the house prices will in turn increase at a steady pace.
The supply of the much needed new homes has four key elements; buyers, developers, local authorities and banks. Supply will only come at a steady pace if we have a functioning market with a steady demand from assured buyers, a construction industry that is geared up to build, local authorities assertively putting roads and services in place and a functioning banking system. Working together will put more people in much needed homes!