IRISH RESIDENTIAL MARKET - 2017 REVIEW, OUTLOOK 2018
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IRISH RESIDENTIAL MARKET
2017 REVIEW, OUTLOOK 2018
OVERVIEW
2017 saw the residential market in Ireland 35,600
continue the steady development seen in APPROXIMATELY 35,600 TRANSACTIONS
recent years, although major imbalances still OCCURRED IN THE FIRST NINE MONTHS OF 2017,
EXCLUDING MULTI-FAMILY/PORTFOLIO SALES.
persist in the market. Positive developments
were evident in both transaction activity and
the supply of new homes.
Nevertheless, chronic supply shortages still plagued the
8.4%
HOUSE PRICES IN IRELAND ROSE BY
market, and against a backdrop of solid economic 8.4% IN 2017.
growth, these forces combined to drive residential prices
up by 8.4% for the year.
The first nine months of the year saw approximately
35,600 single transactions take place according to the 1%. The year also saw some increase in the delivery of
Property Price Register, a 9% increase on the equivalent new housing stock with an upturn in completions,
period in 2016. 2017 also witnessed increased mortgage commencements and planning permissions being
activity, and saw first-time buyers gain a larger foothold granted, albeit from low bases.
in the market. These developments were, in part, helped
However, despite these developments, the demand for
by the introduction of the Help to Buy scheme at the
housing still far outstripped supply in 2017. This
start of 2017, and the relaxation of macroprudential rules
imbalance manifested itself through sharp price
by the Central Bank the previous year.
increases across the country. In Dublin prices rose 8.8%
Furthermore, the average value of new dwellings sold in in the year, up from 3.7% in 2016, while outside the
Dublin in the first nine months of 2017 rose by a modest capital, prices rose from 5.2% in 2016 to 7.9% in 2017.
Sherry FitzGerald | Irish Residential Market Review 2017, Outlook 2018 1
ECONOMIC OVERVIEW
The Irish economy continues to improve in a in the Department’s forecasts, as inflation is expected to
robust manner. The ESRI forecasts growth of gradually gather pace, growing by 0.8% in 2018 and 1.4%
in 2019.
5.0% for 2017 and then a further expansion
of 4.2% in 2018. Such growth levels will Encouragingly, growth prospects in export markets
ensure that Ireland remains among the fastest further afield also appear to be on the rise. The
European Commission estimates that the GDP of the
growing economies in the EU.
euro area grew by 1.6% in 2017, and foresees further
Growth in the labour market is also vigorous, with the growth of 1.8% in 2018, while the IMF recently revised
latest figures from the CSO’s Labour Force Survey their growth forecast for the global economy upwards to
revealing that there were an additional 48,100 jobs 3.7% for 2017 and 3.9% for 2018.
created annually to quarter three 2017, a 2.2% increase. Overall, the KBC Bank Ireland/ESRI consumer sentiment
Furthermore, the unemployment rate, which stood at index showed steady improvement in 2017, despite
6.7% at the end of quarter three, is anticipated to fall displaying intermittent monthly volatility and declining
below 6% before the end of 2018. This would be the first in the final three months of the year. The index closed at
time since 2008 that the unemployment rate has 103.2 in December, substantially up from the 96.2
descended below this threshold. Long-term recorded twelve months prior. The enhanced sentiment
unemployment is also in decline, and for the first time largely corroborates with the improvement in economic
since the final quarter of 2009, it accounts for 40% or conditions over the year and a gradual easing of fears
less of total unemployment. with regards to Brexit. Nonetheless, consumers
Similarly, personal consumption is trending upwards, a remained concerned about their own personal economic
fundamental component of healthy economic expansion. situation, with the feeling being that the improvements
Personal consumption is estimated to have grown by in the economy had not fully translated into improved
2.9% in 2017, and is forecasted to grow by a further 2.9% personal finances.
in 2018. In terms of inflationary pressures, these are
negligible at present, largely due to the decline in value
of sterling following Brexit. However, this subdued level
of inflation, forecasted to be 0.2% for 2017 by the
Department of Finance, is unlikely to hold given the
upward pressures that a growing labour market, real
4.2%
wage growth and rising housing costs place on the price GDP growth of 4.2% is forecast for
of goods. These growing inflationary forces are reflected Ireland in 2018.
Employment and Unemployment Rate %* Consumer Sentiment Index
2,300 18.0% 120.0
16.0%
2,100 100.0
14.0%
2,000 12.0%
80.0
10.0%
1,900
8.0% 60.0
1,800 6.0%
40.0
4.0%
1,700
2.0% 20.0
1,600 0.0%
2007 Q3
2008 Q1
2008 Q3
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
0.0
Dec-07
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
May-13
Oct-13
Mar-14
Aug-14
Jan-15
Jun-15
Nov-15
Apr-16
Sep-16
Feb-17
Jul-17
Dec-17
Employment (Thousands) Unemployment Rate (%)
Source: CSO *Seasonally Adjusted Standardised Source: ESRI/KBC
Sherry FitzGerald | Irish Residential Market Review 2017, Outlook 2018 2
GOVERNMENT INITIATIVES
Several initiatives were introduced over the made available to the direct building programme.
year by the Government in an effort to address As such Rebuilding Ireland’s new target is the
provision of 50,000 new social housing units by
the problems negatively impacting the
2021. The previous target had been 47,000. It is
residential market. expected 33,500 of these units will be delivered by
construction.
The fast track planning system for large-scale housing
came into effect in July. In an effort to hasten the • Local Infrastructure Housing Activation Fund (LIHAF)
delivery of large-scale housing projects, applications for was provided €75 million for its second phase. With
developments of more than 100 homes or blocks of 200 local authority contributions, LIHAF has the potential to
student bed spaces can now bypass local authority provide approximately 5,000 affordable homes by 2021.
decision-making processes and be made directly to An
• A new time-limited tax deduction for pre-letting
Bord Pleanála.
expenses was introduced, applicable up to 2021, to
Taking effect on the 1st January 2018, the Central Bank persuade holders of vacant residential property to
has made revisions to the Loan-to-Income (LTI) make it available to rent. To be eligible, the property
Allowances. From this point on only 10% of the value of must be vacant for a minimum of twelve months, and
new mortgage lending to second and subsequent remain available to rent for a minimum of four years.
buyers can be above the LTI cap, while 20% of the value Allowable expenses are capped at €5,000 per property.
of new mortgage lending to first-time buyers can be
above the LTI cap. Previously, the LTI limit was not to be
exceeded by more than 20% of the euro value of all
housing loans for principal dwelling purposes during an
annual period.
The Government also announced the introduction of a
new low interest mortgage scheme beginning February
1st, 2018. In total, €200 million will be made available for
those first-time buyers on low and middle incomes.
Budget 2018 also saw a number of measures
implemented in an effort to address the lack of supply in
50,000
the residential market. These included: Rebuilding Ireland is targeting the provision of
• Reducing the period in which property owners must 50,000 new social housing units by 2021.
retain qualifying assets in order to gain full relief from
Capital Gains Tax from seven to four years.
• The commercial stamp duty rate was increased
from 2% to 6%, however a rebate of stamp duty
for residential development land was introduced
for developers who commence building within 30
months of purchasing the land.
• The vacant site levy was increased, rising from 3% to
7% in the second and subsequent years.
• Home Building Finance Ireland was allocated €750
million for the commercial funding of residential
development.
• Capital expenditure on social housing was increased
by €31 million, bringing the total budget to €115
million, with local authorities and approved housing
bodies expected to deliver 4,000 new social housing
units in 2018. A further €500 million will also be
Sherry FitzGerald | Irish Residential Market Review 2017, Outlook 2018 3
TRANSACTION ACTIVITY
The latest available data from the Property billion, were drawn down in 2017. This denotes a 14.7%
and 23% year on year increase in the volume and value
Price Register (PPR) reveals that just over
of loans, respectively. Similarly, the volume and
37,500 transactions were recorded during the
proportion of first-time buyers in the mortgage market
first nine months of 2017. This represents a 9% also increased. Over the same timeframe, the volume of
annual increase in the volume of sales over the first-time buyers drawing down mortgages increased by
same period in 2016. 23.6%, while simultaneously increasing their share of the
mortgage market from 56.9% to 58.8%.
Due to the time lag in logging data to the PPR, the first
nine months is the most accurate data available.
Following the exclusion of multi-family/portfolio
transactions, the number of transactions falls to
approximately 35,600, with an approximate value of
€9.2 billion. Notably, 32% of the total number of
transactions occurred in Dublin.
Over the first nine months of the 2017, all regional
Volume of Transactions – Nationwide*
centres noted increased sales activity compared to the
equivalent period the year before. Of all the major urban
areas, the capital saw the largest increase over the 14,000
period with nearly 11,400 transactions taking place, 12,000
representing a 10% increase on an annual basis. Similarly,
10,000
Cork witnessed an upturn in activity with approximately
3,800 properties transacting over the same interval, 8,000
signifying a 4% expansion in activity. Additionally,
6,000
Limerick and Galway also saw a ramp up in activity,
growing by 7% and 2% respectively. 4,000
2,000
Government initiatives, particularly the Help to Buy
scheme, have facilitated mortgage activity growth and 0
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
aided in increasing the proportion of first-time buyers in
the market. According to the Banking & Payments
Federation, excluding top-ups and re-mortgages, a total Source: PPR/Sherry FitzGerald Research
of 29,395 mortgages, with an approximate value of €6.4 *excl. block/multi-family sales
Sherry FitzGerald | Irish Residential Market Review 2017, Outlook 2018 4
As mortgage activity has intensified over the last year
and a half, correspondingly there has been a decline in Profile of Purchasers, 2017
the proportion of cash buyers present in the market.
Through a comparison of mortgage market data made Ireland Dublin
available by the Banking and Payments Federation
Owner Occupation 72% 79%
Ireland and the Property Price Register, it is possible to
estimate quantity of cash buyers. During the first nine Investment 20% 15%
months of the year, 42% of single property transactions
Additional Residence 7% 5%
occurred without a mortgage drawdown. In comparison,
47% of purchases in the market were cash buyers over Other 1% 1%
the equivalent period in 2016. Source: Sherry FitzGerald Research
A review of all closed transactions in 2017 by Sherry
FitzGerald reveals that there was little change to the
composition of purchasers in the second-hand
residential market over the course of the year. Owner Vendor Analysis, 2017
occupiers continue to be the largest contingent in the
market, comprising 72% of the market share. Investors
Other
and individuals purchasing additional residence by and Bank
Repossession
large constitute the remainder of the market. Selling
Investment
Likewise, an analysis of vendors in the market reveals Smaller 11%
House
little change has taken place in 2017. Private investors
continued to exit the market, totalling 33% of all
9%
vendors, with a substantial difference existing between 33%
the number of investors entering and exiting the market.
The discrepancy between investors entering and exiting
the market further highlights the current crisis in the 10%
lettings market.
12%
13%
Larger 12%
House
Relocating
in Ireland
Executor Sale
Source: Sherry FitzGerald Research
Sherry FitzGerald | Irish Residential Market Review 2017, Outlook 2018 5
RESIDENTIAL PROPERTY PRICE
PERFORMANCE
2017 saw a sustained ascent in residential
Sherry FitzGerald All Ireland Barometer of Second-Hand
property prices in Ireland. The Sherry House Prices
FitzGerald Barometer recorded price growth
of 1.5% in the final quarter of the year. This 250 Index Base Year = Q4 2001
brought cumulative price inflation for 2017
to 8.4%, noticeably up from the 5.2% recorded 200
in 2016.
150
This elevated level of growth stems from a prospering
economy and expanding labour force, operating in 100
conjunction with demographic pressures to increase
housing demand. The situation is being exacerbated by 50
depleted levels of available housing stock, creating
supplementary demand pressures. 0
Q4 2004
Q2 2005
Q4 2005
Q2 2006
Q4 2006
Q2 2007
Q4 2007
Q2 2008
Q4 2008
Q2 2009
Q4 2009
Q2 2010
Q4 2010
Q2 2011
Q4 2011
Q2 2012
Q4 2012
Q2 2013
Q4 2013
Q2 2014
Q4 2014
Q2 2015
Q4 2015
Q2 2016
Q4 2016
Q2 2017
Q4 2017
Following an analysis, Sherry FitzGerald Research
estimated that, in January 2018, just 1.1% of second-hand
private stock nationally was advertised for sale, while Source: Sherry FitzGerald Research
only 0.6% of stock was advertised in Dublin.
Conventional economic thought suggests that 4% of all
stock should be advertised for sale at any given time.
Sustained price increases were prevalent throughout the
country. Dublin saw an upturn of 1.5% in quarter four,
with growth totalling 8.8% for 2017. This was a significant
8.8%
upturn on the 3.7% recorded for the previous year.
Excluding Dublin, the rest of Ireland saw prices rise by
1.5% in the final quarter of 2017 and by 7.9% for the full
calendar year, marginally stronger than the 7.3% growth The Dublin market saw price inflation of 8.8%
rate recorded for 2016. in 2017.
Sherry FitzGerald | Irish Residential Market Review 2017, Outlook 2018 6
The regional centres of Galway, Cork and Limerick also
Regional Price Performance, 2017*
experienced substantial price growth of 8.4%, 7.3% and
7.4% respectively over the twelve-month period.
A breakdown of price performance by NUTS 3 regions
reveals that the South-East registered the strongest
increase in house prices in 2017, with prices rising by
10.1%. This was followed by the Border region and
Dublin, with growth of 9.7% and 8.8% recorded in these
regions respectively.
Price growth in the Midlands region stood at 8.5% for
2017, while the West, Mid-West, Mid-East and South-
West regions logged growth of 8.0%, 7.9%, 7.2% and
7.0% respectively, over the same period.
It is important to note that the end of 2017, second-hand
house prices nationally still remain 34.6% below their
2006 peak, while prices in the capital are 35.5% lower.
Price performance, %
> 9.0
8.0 - 9.0
7.0 - 8.0
Source: Source: Sherry FitzGerald Research
*CSO NUTS 3 statistical regions
Sherry FitzGerald | Irish Residential Market Review 2017, Outlook 2018 7
NEW HOMES MARKET
There was a number of notable developments Additionally, an analysis of new homes sales in Dublin
in the new homes market in 2017. The volume transacted through Sherry FitzGerald confirms that sales
in the sub €350,000 new homes market eclipsed all
of new home sales increased substantially, as
other categories in the rest of the market. Sales in this
did first-time buyer activity. In addition, there category comprised of 44% of all new sales made
was a stabilising of new home prices in Dublin. through Sherry FitzGerald in Dublin in 2017, having
increased in volume by 38% in the year.
Per the latest up to date data from the PPR, the first
nine months of 2017 saw the volume of new dwellings
transacting increase by 27% nationally, and by 36% in
Dublin. The average price of new dwellings sold
nationally rose by 9% on annual basis, however average
prices in Dublin significantly lagged the rest of the
country, growing by just 1%.
The slowdown in residential property price inflation in
new dwellings in Dublin is an early indication of the
positive impact of the Help to Buy scheme and the
revision of the macroprudential rules in 2016 have had in
inducing the greater supply of new houses. This is
evident through the rise in new dwellings transacted
according to the PPR, as well as the increase in both
36%
scheme house completions and apartment completions There was a 36% increase in the volume of new
in the capital in 2017. Both having notably augmented in dwellings sold in Dublin in the first nine months
the year, 37.9% and 61.8% respectively. of 2017.
Sherry FitzGerald | Irish Residential Market Review 2017, Outlook 2018 8
SUPPLY SIDE ANALYSIS
Despite witnessing a notable pick up in Completions in Regional Centres, 2016 & 2017
residential building activity the past year,
output still lags demand considerably. All 7,000 Units
major regional centres did note significant 6,000
upturns in completions and commencements
5,000
in 2017, albeit the rate of expansion was not
evenly dispersed across the country. 4,000
3,000
According to the latest figures from the Department of
Housing, Planning, Community and Local Government, a 2,000
total of 19,271 ESB connections were recorded over the
1,000
course of 2017, an annual increase of 29.1%. Average
monthly completions stood at 1,606 for 2017, 0
Dublin Cork Galway Limerick
considerably higher than the five-year monthly average
2016 2017
of 1,103. Nevertheless, these figures are dramatically
below the 40,000 new housing units Sherry FitzGerald Source: DoHPLG
estimates need to be constructed each year between
2018-2021.
Delving below the national level, it is evident that Dublin
and Limerick observed the greatest upsurge in activity
of the major regional areas. A total of 6,099 completions
were recorded in Dublin in 2017, a 44% year on year
increase. Limerick marginally exceeded Dublin in terms
of growth, with completions rising by 48% year on year.
However, with a total of 708 completions in the year,
Limerick is still operating from a very low base. Galway
and Cork also witnessed growth in the year, but at a
more subdued level with completions rising 24% in
19,271
Galway, for a total of 1,010 completions, and rising 13% in There were 19,271 new ESB connections
Cork, for a total of 2,048 completions. recorded in 2017.
Sherry FitzGerald | Irish Residential Market Review 2017, Outlook 2018 9
Breaking down completions by type, encouragingly
scheme houses were the predominate type of
completion in the 2017. They accounted for 47.1% of all
completions nationally, and grew by 41.2% in the year.
Apartments comprised 15.4% of all completions
nationally, with the quantity of apartment completions
rising 28.3% from 2016 to 2017. The remaining 37.6% of
completions were for individual houses, with the number
of completions in this sub category growing by a more
moderate 16.7%.
The composition of completions for Dublin differs
significantly from that of the national profile, with a
greater prevalence of scheme houses. In Dublin in 2017,
57.7% of all completions were scheme houses, while a
further 34.0% were apartments. The remaining 8.3%
were completions for individual houses. Both the volume
of scheme house and apartment completions
augmented substantially in the year, growing by 37.9%
and 61.8% respectively. However, the actual levels of
output of these housing types are still distinctly low.
The latest data from the Department of Housing,
According to the latest data from the CSO, a total of
Planning and Local Government on commencement
4,730 new dwelling units were granted planning
notices illustrates a comparable view of increased
permission in the third quarter of 2017, with a cumulative
supply. There were 17,572 commencement notices in
total of 13,842 new dwelling units granted permission in
total issued nationally for 2017, representing a 33%
the first nine months of 2017. As such, there was an
increase on the previous year. Dublin Local Authorities
annual increase of 14.9% in the volume dwelling units
issued 6,987 notices in 2017, a 29% increase on an
granted planning permission.
annual basis. This is a notable rise considering activity
had lagged 2016 for much of the early part of the year. A breakdown of the total figure reveals that planning
Fingal and Dublin City encompassed the majority of permissions granted for units in multi-developments
activity. There was an increase in commencement accounted for 7,245, or 52% of the total, for the first nine
notices in all of the regional centres in the year, with the months of 2017. The number of one-off houses granted
quantity of notices issued in Cork, Limerick and Galway planning permissions accounted for 3,903, or 28% of the
rising by 13%, 3% and 58% respectively. However, again it total, while apartments accounted for 2,694, or 20% of
must be stated these increases were from a low base. the total.
Residential Building Activity 2008 – 2017 Planning Permissions by Type, 2010 – Q32017
5,000 Units 7,000
4,500
New building 6,000
control regulations
4,000
1st March 2014
5,000
3,500
3,000
4,000
2,500
3,000
2,000
1,500 2,000
1,000
1,000
500
0 0
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Mar-15
Jul-15
Nov-15
Mar-16
Jul-16
Nov-16
Mar-17
Jul-17
Nov-17
Commencements Registrations Completions Multi-development One-off houses Apartments
Source: DoHPLG Source: CSO
Sherry FitzGerald | Irish Residential Market Review 2017, Outlook 2018 10OUTLOOK FOR THE FUTURE
The outlook for the residential property sector demand. Furthermore, the Government’s prolonged
inaction in addressing the crisis in the rental market has
in 2018 and further into the future remains
been a frustration. Measures to encourage investors to
distinctly mixed. As the UK’s exit from the EU
enter the market and raise the supply of buy to let
drags on, the consequences for Ireland still properties is also needed, if there is to be any
remain unclear. Unfavourable developments in stabilisation in rents over the year.
the second round of negotiations, beginning
in March, could still have a major impact on
Ireland’s economic circumstance.
At a national level, given the expected development of
the economy, the strength of the labour market, as well
as demographic pressures, the severe imbalance
between supply and demand is likely to persist. Thus,
the sustained price growth experienced last year is likely
to continue with current indications suggesting that
prices will increase by 6-8% in the established housing
market in 2018
Progress has been made by the Government to stimulate
greater supply. The fast track planning initiative, along
with the measures introduced in October’s budget
should go some way to rectifying the divergence
between demand and supply in 2018. Similarly, the Help
to Buy scheme is likely to have a continued positive
impact in inducing the supply of starter homes over the
course of the year.
Nevertheless, further efforts to increase supply in all
locations is needed. Current construction output still
cannot deliver the approximate 40,000 new homes,
Sherry FitzGerald estimates needs to be delivered per
annum between 2018-2021, if supply is to equate to
Sherry FitzGerald | Irish Residential Market Review 2017, Outlook 2018 11CONTACT DETAILS AUTHORS Marian Finnegan Eoin Lynch Chief Economist, Junior Economist, Director Research Researcher +353 (0) 1 237 6341 +353 (0) 1 237 6474 marian.finnegan@sherryfitz.ie eoin.lynch@sherryfitz.ie About Sherry FitzGerald Group Since its foundation in August 1982, the Sherry FitzGerald Group has grown from a small fledgling company in one location to a nationwide, diversified business operating in 97 different locations. Sherry FitzGerald Group currently employs 650 people across a diversified residential and commercial property business and remains an Irish privately owned business committed to continuing to lead the marketplace as it has done over the last 35 years. For further information please visit www.sherryfitz.ie © 2018 CONFIDENTIALITY CLAUSE This information is to be regarded as confidential to the party to whom it is addressed and is intended for the use of that party only. Consequently and in accordance with current practice, no responsibility is accepted to any third party in respect of the whole or any part of its contents. Before any part of it is reproduced, or referred to, in any document, circular or statement, our written approval as to the form and context of such publication must be obtained.
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