Irish house prices expected to continue rising in 2015

Taylor Scott International News

New mortgage rules and the recently announced quantitative easing programme will have a game changing impact on investor demand for residential property in Ireland, according to a new analysis. International property advisor Savills expects that house prices will continue to rise in 2015 due to an overall shortage of supply relative to demand. However, because compounding price growth over the last two years has raised baseline prices, the percentage rate of growth will be more moderate than before. The Irish Central Bank’s new mortgage rules will channel demand into the rented sector leading to further rental growth, according to John McCartney, director of research at Savills Dublin. He pointed out that this, and falling deposit yields due to quantitative easing, will attract investors despite the expiry of Capital Gains Tax Incentives last December. ‘By increasing the down payment that is needed to qualify for a mortgage, the Central Bank rules will inevitably lead to first time buyers spending longer in rented accommodation,’ he said. ‘This guarantees a stable platform of demand which will undoubtedly encourage landlords to invest. At the same time, investors will be driven into property by low returns on cash deposits, and these are being further depressed by quantitative easing,’ he added. He explained that while these factors will continue to attract large institutional investment into ‘multi-family’ residential blocks, they will also lead to continued buying activity by smaller retail investors. However, according to Graham Murray, director of residential at Savills, the profile of these investors is changing dramatically. ‘We are really seeing a changing of the guard. On one hand, the recovery in house prices has provided the opportunity for many of the accidental boom time investors to exit the market and, reflecting this, investors were our second biggest seller group last year,’ he said. ‘At the same time, there is a new breed of more professional, yield driven landlords flooding into the market. In fact this new generation of investors represented our biggest single group of buyers last year,’ he added. Contrary to the popular opinion, Savills believes that the Central Bank mortgage rules will do nothing to reduce the rate of house price growth and will only result in a change in the mix of buyers. ‘By diverting demand into the rented sector the new rules will lead to stronger rental growth. In time this will attract investors who will compete with everybody else to buy properties. Therefore the new measures will do nothing to soften house price growth by curtailing demand. They will simply increase the ratio of investors to first time buyers,’ said McCartney. Elsewhere in the report, Savills notes that declining affordability in Dublin, combined with demographic trends, will lead to increased demand and sharper house price growth in the commuter counties of Wicklow, Kildare and Meath. ‘Prices outside Dublin have been rising at an accelerating rate for the last nine months. This is set to continue as demand is… Continue reading →

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