After two turbulent years, hopes were high that 2022 would see a return to normality. Unfortunately, it was not to be. The war in Ukraine and the associated economic challenges have all created increased uncertainty in all aspects of life. For property, the most direct impact of uncertainty was on construction. While house completions are expected to reach 26,000 this year, the anticipated precipitous recovery in supply in 2023 and beyond is now less likely. As such, a significant supply deficit will persist.
The scale of this undersupply in Galway is evident in the fact that there were only 874 properties for sale in Galway city and county in July 2022, representing only 0.8 per cent of the county’s housing stock. This represents a 31 per cent decrease on pre-Pandemic levels in 2019.
Such low levels of supply have resulted in a period of above trend price inflation. According to the Sherry FitzGerald Price Index, second-hand house prices in Galway rose by five per cent in the first nine months of 2022. This is in line with national levels of price growth and is down from eight per cent over the same period in 2021. Further price inflation in low single digits is expected in the Galway market in 2023.
The dearth of available stock has meant that demand for all categories of property remained quite robust in 2022, with transaction volumes surpassing their pre-pandemic levels. Further growth to more than 60,000 transactions nationwide is expected for 2023, with particularly robust activity in rural and coastal areas. Indeed, the two highest value residential sales in County Galway in 2022 were of coastal seaside properties, both of which were sold by Sherry FitzGerald, one at Seamount, Salthill, and the second property, Whale Harbour, Roundstone, Co Galway, both achieving well in excess of €2m. Likewise on new homes sales this shortage of supply is reflected in very healthy sales at developments such as Sli na Craoibhe, Knockncarra, luxury seaside apartments at 105 Salthill and Cnoc an Chaisleain, Oranmore, by Sherry FitzGerald.
Interestingly, homebuyers are no longer only concerned with the popular population centres, as flexible work arrangements introduced during Covid-19 have meant that people are willing to live further from their workplace. If this trend is to continue, one positive aspect is that it might alleviate some of the pressure seen in the areas with the most acute shortages of supply.
Finally, the rental sector remains crippled by historically low supply, with enduring high levels of rental inflation.
As we look ahead to the new year, unfortunately, many of the challenges currently facing the market will continue to persist. The wider economy is expected to slow significantly because of the tightening of monetary policy. Construction activity looks set to drop off as firms must now tackle both input price inflation and the rising cost of borrowing, making many projects less viable in the current market. All these factors will only further exacerbate the issue of supply. Property and the provision of affordable accommodation is an essential need and element to help Galway achieve its ambitious economic and population growth targets as laid out under The Galway 2040 Plan, and we need to get solutions to these housing issues.
Despite these concerns, demand is anticipated to continue to significantly outstrip supply both nationally and in Galway. The easing of the macroprudential rules will ensure that demand remains strong as borrowers can make use of higher loan-to-income limits. Mortgage rates also remain relatively low in a historical context, despite recent increases. The Galway residential property market in 2023 looks set to perform well with steady activity.
