The rate of price growth in the property market was given new impetus in 2005, as commentators were surprised by the renewed buoyancy and the majority of market sectors saw increases that, in some cases, went beyond expectations.
'Demand for housing continues to outstrip supply, with double digit average inflation in all house sectors in 2005, though the average rate of increase for apartments was lower, ranging for the second-hand sector from 4.8% for one-bedroom unit in Connaught to 9.4% for a two-bedroom unit in Dublin' declared IAVI CEO Alan Cooke as the Irish Auctioneers & Valuers Institute released Ireland's most comprehensive property survey for 2005, carried out across all market sectors among IAVI's 1,900 members nationwide.
‘A shortage in supply of large Dublin second hand family homes is pushing prices up further, as three-and- four bedroom houses saw the highest average rate of increase, at over 13%. While average prices of second hand houses in Dublin increased by 11.3% to 13.5%,’ noted Mr Cooke, ‘some areas saw staggering increases. One member said the largest movement in prices occurred in Dublin 6, which saw median house prices rise by 23.5%.'
'A factor that increased prices at the lower end of the market was the changes in stamp duty exemption levels at the start of 2005. The increase from €190,000 to €317,500 had the effect of pushing up prices for first time buyers in the Greater Dublin Area. Towards the end of 2005, some Dublin agents – and indeed those in other cities throughout Ireland – reported instances where vendors put their homes on the market at €280,000 and received first bids of €317,500 as buyers sought to override the opposition by getting to the stamp duty exemption threshold first.’
'One of the surprise turnarounds of the year was in the residential rental sector, which saw a modest increase following several years of falling rents, as Ireland's new immigrant population strengthened demand' said Cooke.
'Immigrants also played a role in the market for the sale of new homes and one Dublin agent reported that the sale of new homes to non nationals jumped from 5% two years ago to 30% last year. IAVI members in Dublin are reporting average price increases in this sector of 7.9% (1-bed apartments) to 11% (3-bed semis) in 2005 although, again, these are average increases and will have been exceeded in many instances. New home price increases were just as strong in the Rest of Leinster and Munster, while Connaught saw increases in the 6-7.7% range.'
A shortage of supply in development land throughout the country pushed up prices further in 2005, as this sector once again experienced a bumper year in many areas. According to the IAVI statistics, housing development site values in Dublin and the rest of Leinster and Munster were up by more than 15%. Members have reported a shortage of prime development sites in the Dublin area, leading to strong price inflation with infill sites increasingly being sought after in the capital as such sites offer the developer an opportunity to build and sell in established areas. Planning problems encountered by some developers, particularly in the Dublin area, are impacting by curtailing much needed supply.
As in 2004, the rate of increase for residential development land remains higher than rates of increase in the new homes sector, indicating strong confidence on the part of developers in relation to future market demand for new homes.
The retail sector continues to show the way in terms of commercial growth. Increases of 5-7% are expected in capital values in 2006, to copper fasten substantial rental and capital growth last year, as agents expect yields harden further and rental values to jump by another 3.1% (in Connaught/Donegal) to 6.5% (in the Rest of Leinster).
The future is also looking positive for industrial and office capital values, as IAVI members predict higher rates of growth; Leinster agents are the most positive, expecting office capital values to grow in 2006 by 6.8%, compared to 4% in Dublin and a modest 1.6% in Connaught/Donegal.
The licensed sector had a mixed year and any average price increases recorded were hardly earth-shattering. Prime Dublin pubs improved from 2004, reversing a reduction in capital values of 4.2% in 2004 to an increase of 2% this year. Hotels typify the mixed licensed sector market, with those in Dublin and Connaught showing average increases of 2% and 2.3% respectively, while those in Munster and the rest of Leinster respectively fell on average by 1% and 2.5%; this may reflect the much publicised problems in rural tourism.
Prices achieved for farmland continue to belie agricultural economics. Farm prices were particularly strong in 2005, with hope value often playing a huge role in boosting prices. IAVI members in some parts of the country note that sales of farmland to working farmers is becoming something of a rarity, as this market is increasingly influenced by both developers and financially successful individuals seeking to relocate from cities to a more rural environment.
52% of all respondents predicted higher employment in the property profession in 2006, with just 3% expecting a reduction, so the outlook for young graduate auctioneers and estate agents remains positive.
The IAVI is the country’s largest property organisation, with over 1,900 qualified auctioneers, estate agents and valuers spread throughout the 32 counties, and more than 500 Member Firms, including all the national agencies.
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