National property prices are set to rise by an average of 7% in 2017 with even higher price increases predicted for the Leinster region according to the Society of Chartered Surveyors Ireland.
According to the SCSI's Annual Residential Property Review and Outlook Report 2017, the price of the most popular house type, the 3 bed semi detached is predicted to rise by an average of 9.4% nationally.
Chartered Surveyors in the Leinster region, excluding Dublin, anticipate the greatest increases across all housing unit types with an increase of 11% projected for 1 and 2 bed apartments and a rise of 10.6% forecast for 3 bed semis. The price of a three bed semi in Dublin is predicted to rise by 9.5%.
The survey predicts that residential rents will rise on average by between 8 to 10% outside of the rent control areas of the four local authority areas of the Dublin Region and Cork City Council area. Annual rent increases are capped at 4% in these designated pressure zones. The Government is reported to be planning to extend these zones to 20 more towns.
Over 380 estate agents and Chartered Surveyors took part in the survey in late November/early December. Future Analytics Consulting was commissioned by the SCSI to carry out the research.
Ronan O'Hara, Chair of the SCSI's Residential Agency Group, said the lack of supply, public policy and projected economic growth may continue to inflate house prices, but he warned that the latter could not be taken for granted given the uncertainty caused by Brexit.
"Four our out of five surveyors (78%) outside Dublin believe Brexit will have a negative impact on our economic growth. While this figure drops to 50% in Dublin, it shows the uncertainty which exists for the coming year.
"The drop in sterling has reduced the buying power of people looking to move here and that is probably one of the reasons why thirty six per-cent of surveyors across the country believe that Brexit has already had a negative impact on residential activity levels. Interestingly, a clear majority of surveyors (62%) anticipate that additional countries will vote in favour to leave the EU over the next 3 years."
He continued, "on the other hand, the changes which the Central Bank made to its lending rules and the introduction of the 'Help to buy' scheme are likely to contribute to an increase in activity in the short to medium term. Eighty per-cent of respondents to our survey believe 'Help to buy' will lead to price increases in the coming year. While this is good news for vendors, struggling first time buyers will be disheartened. While rising prices will probably encourage more builders to start building houses it really is up to Government to tackle some of the underlying issues - including high construction costs - and to make housing more affordable."
"The issues shouldn't come as a surprise. Surveyors in Dublin highlighted the shortage of development land as the biggest hurdle while in the other three regions surveyors saw construction costs and the availability of finance as the main challenges," O'Hara said.
The report anticipates continued and strong rental price growth over the coming 12 months across all regions, fuelled by a sustained demand combined with a continuing housing shortage particularly in and around the regional cities.
According to the report the estimated figure for new builds at the end of 2016 will be 14,800. This figure falls significantly short of the 20 to 30,000 required. O'Hara said that while demand for housing is greatest in Dublin the fact that commencements outside the capital are running three times higher is a concern.
"In 2016 there was a 27% increase in planning permissions in Dublin, the lowest increase in all 4 regions. For example the figure in Munster was 42%. While these figures may look impressive, they are coming off a very low base. By right Dublin should be taking the lead here but it isn't. The number of commencement notices is even worse. In the ten months to Oct 2016 there was an 8% increase in commencements in Dublin. The figure for Munster was 44%."
"This is a huge issue for first time buyers hoping to get on the property ladder. But given the concerns raised by our members over Brexit, it is also a huge issue for the country as a whole. If we cannot provide an adequate level of housing we will lose out on any FDI opportunities afforded to us by Brexit. Time is running out and that is why we have been urging the Government to cut the Vat rate on new houses. It has worked for the hospitality sector, it would also work for the construction and property market" O'Hara concluded.
The SCSI's Annual Residential Property Review and Outlook Report 2017 is available at www.scsi.ie