House prices rise by 4.3% amid lifting of Covid-19 restrictions, report says

House prices have bounced back since the lifting of coronavirus lockdown restrictions, rising by 4.3 per cent between June and August, according to a report by property website MyHome.ie and stockbroking firm Davy.

This comes in the wake of a 3 per cent decline in prices in the second quarter of the year, which coincided with the main outbreak of Covid-19 and subsequent lockdown.

The report, which covers the two-month period between the end of June and August, indicated that the average asking price for a house in the Republic was €280,000, up 4.3 per cent on the second quarter.

In Dublin, average house prices rose by 2.9 per cent to €383,000, while outside Dublin, asking prices rose by 4.7 per cent to an average of €234,000.

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"The MyHome data shows pricing has held up during the summer months; the negative 3 per cent inflation rate seen in Q2 2020 now seems an aberration, driven by the small numbers of vendors prepared to put their homes on the market during the exceptionally uncertain period of the lockdown," Conall Mac Coille, chief economist at Davy, said.

“ Looking ahead we think prices will be broadly flat in 2020, or see marginal declines, but the impact of Covid-19 on the housing market could have a longer, [more] slow-burn impact than many appreciate,” he said.

Experts had predicted a significant downturn in housing demand due to falling incomes and higher rates of unemployment, resulting in falling prices.

The hiatus in construction during lockdown is expected to result in fewer homes being built and further supply pressures in the market, however, which has the potential to push prices the other way.

Angela Keegan, managing director of MyHome.ie, said the increase in asking prices was likely a combination of people who already have mortgage approval moving to secure properties, and a shortage of stock.

“One of the many negative effects of Covid-19 has been the decrease in construction output, which has had significant ramifications for the property market. Anecdotally we are also seeing people who have mortgage approval acting fast to secure properties and this, added to the fact that stock levels are low, is driving asking prices upwards,” she said.

Mortgage approvals

Meanwhile, new figures published on Friday by Banking and Payments Federation Ireland (BPFI) show that 3,397 mortgages were approved in July, up 50.1 per cent on the figure for June but down by 33.8 per cent compared with the same month a year earlier.

First-time buyers accounted for 1,883 of the approvals, to a value of €462 million. An additional 750 mortgages approved were for mover purchasers, to a value of €196 million.

Purchase mortgage approval activity fell by 35.8 per cent year-on-year in terms of volume in the month, and by 33.2 per cent in value.

"With the reopening of the economy we have seen a significant increase in mortgage approval numbers in July compared to the previous month; however, on a year-on-year basis, approval numbers are still down, which is not unexpected," said BPFI chief economist Dr Ali Ugur.

“On the other hand, when we look at annualised mortgage approval activity, which is a better indicator of the trend, there were 40,090 mortgage approvals in the 12 months ending July 2020, valued at €9.2 billion. Annualised mortgage approval activity to end-July 2020 decreased in volume terms by 4.1 per cent compared with the 12 months ending June 2020 and decreased in value terms by 3.7 per cent over the same period,” he added.

Residential investment letting approval volumes were down 48.4 per cent year-on-year to 80 in July, while remortgage/switching approvals were 15.1 per cent lower at 465.

Covid impact

The Central Statistics Office’s (CSO)Residential Property Price Index for June indicated property prices nationally rose by 0.1 per cent in the 12 months to June, but were down 0.7 per cent in Dublin, where supply pressures are most acute.

The figures also pointed to a 33 per cent drop in the number of transactions in June compared with the same month last year.

The index, however, primarily reflected activity before the coronavirus-related shutdown, and it may be several months before the full impact of the Covid-19 pandemic shows up in the CSO’s figures.