Still cheaper to buy than to build

A leading auctioneer in County Cavan doesn’t see any let up in rising house prices locally within the next 24 months.

Declan Woods from Sherry FitzGerald Declan Woods made the comments in response to the publication of the latest Daft.ie report earlier this week. It showed that residential property prices were almost six per cent higher in County Cavan than a year previously. The average price of a home in the Breffni county is now €227,723, some 19% below its Celtic Tiger peak.

The typical listed price nationwide in the second quarter of 2024 was €340,398, some 6.7% higher than in the same period a year earlier.

Put simply, Mr Woods says a number of factors are driving sale prices - predominantly a lack of supply, high rents and the fact that it is still cheaper to buy than to build.

“It’s basic economics. It comes down to supply and demand. When you have limited supply and over demand, prices will only go one particular way and that’s what we’re seeing at the moment,” said the Cavan-based auctioneer.

Putting this into perspective, the DAFT.ie report said there were just over 11,350 second-hand homes available to buy nationwide on June 1. That’s down 18% year-on-year and less than half the 2015-2019 average of almost 25,000.

The report highlights how, since the start of the year, there have been consistently fewer than 12,000 second-hand homes available to buy at any one time. The only other time the market has been as tight, in a series extending back to 2007, is the period January-May 2022.

“We had more than double the units available between 2015 and 2019 and that’s when we were just recovering from the economic crash and the property market was coming back to life. Now the market is strong, and the demand is there, and we have half that,” explained Mr Woods.

He said that demand from first time buyers is strong. “First time buyers are being driven to buy by high rents. It’s far cheaper to manage a mortgage payment now than to service rent payments. People who previously sat on the fence are looking to buy,” said Mr Woods.

There is also strong demand locally from purchasers who are entering retirement years and looking to downsize and move into smaller, more manageable homes in urban areas. This, Mr Woods explains, is a “right-sizing market”.

“If you talk to anyone in our profession at the moment, they are screaming about the shortage of available properties,” he added.

Outlook

In terms of the outlook for supply, the property expert doesn’t anticipate any major change over the next few years while it remains cheaper to buy than to build.

Mr Woods accepts that, while plans have been submitted and granted for multiple housing developments and units in the county in recent times, he says it makes little sense for developers to move on those yet.

Looking at neighbouring counties, the picture is similar as far as increases go. Leitrim and Monaghan both recorded increases of 8.6% over the past year. Westmeath saw a 9.4% hike; while Longford and Meath had rises of five per cent and 6.2% respectively over the period.

Despite the increases, the least expensive houses in the country can be purchased in neighbouring counties Leitrim, Longford and Roscommon at €198,860, €202,202 and €212,196 respectively.

Not surprisingly, the most expensive properties are in south South County Dublin, with an average of €694,602 reported.

According to the latest report, while the increase in the second quarter was broadly based, there remain “notable differences” in price trends across the country.

The report’s author, Ronan Lyons, economist at Trinity College Dublin, says the “tightness” in availability has put upward pressure on housing prices.

“As the figures show, inflation had peaked in late 2021, as that glut of savings found its way into the housing market. Inflation cooled from 13% in mid-2021 to just 2.6% in mid-2023. As of mid-2024, however, it is back to 6.7%. Where it goes next will depend on how fast second-hand supply recovers,” he remarked.