Following another turbulent year, we appear to be returning to a greater degree of normality in the wider economy. Inflation in Ireland fell to 2.3 per cent in November, edging closer to the ECB’s target of two per cent, and supply chains have mostly recovered following the invasion of Ukraine. However, risks do remain. We now find ourselves on the back of the most aggressive series of interest rate hikes in the history of the euro. Also, escalating tensions between the USA and China, and the conflict between Israel and Palestine remain causes for concern.
For the Irish property market, supply continues to be the key issue hampering its success. Despite a projected 31,000 homes to be completed this year, we are a long way from our estimation of 52,000 homes per annum to return to a functioning housing market. Furthermore, of that 31,000, only 9,000 homes will be available for private purchase. The remainder will be acquired for social housing or by institutional investors.
The scale of undersupply is evident in Galway in the fact that there were only 770 properties for sale in Galway city and county in July 2023. This represents a mere 0.7 per cent of the county’s housing stock. Comparing this with the same period in both 2022 and pre-Covid 2019, stock for sale is down 12 per cent and 39 per cent, respectively.
Price inflation has moderated this year, but the lack of supply continues to put upward pressure on prices. According to the Sherry FitzGerald Price Index, second-hand house prices in Galway rose by 2.6 per cent over the first nine months of the year which is in line with the national level of growth.
A symptom of such low stock is a greater demand for properties across the board. Transaction volumes continue to surpass pre pandemic levels, with an estimated 60,000 transactions to be completed this year, a figure which only looks set to rise further alongside completions in 2024.
Moreover, a rising proportion of these transactions continues to take place outside of the population centres in rural and coastal towns. The fallout from Covid-19 has resulted in greater hybrid working opportunities, allowing homebuyers to consider options further from their place of work.
Our experience on the ground in the Galway city market would reflect the conflicting pressures evident. Tight supply has kept healthy activity for all forms of residential properties from apartments through to larger detached homes and in many instances having active competitive bidding. On the other hand the rising interest rates and cost of servicing a monthly mortgage has made some buyers more cautious in their approach to buying. The market has remained very healthy in 2023 and has experienced capital growth over the 12 months. Areas such as Salthill, Taylor's Hill and Barna have shown even tighter supply issues. Suburban areas like Knocknacarra, Newcastle, Renmore and Roscam had more transactions as properties tended to be more affordable for quality well established locations. Likewise larger detached homes within a 15km radius of the city from Furbo, Moycullen, Corrandulla, Claregalway, and Derrydonnell, to Clarinbridge and Oranmore also sold well and were very much sought after.
The new homes market was even healthier as the hope of buying a modern A-rated efficient home appealed to many and this, coupled with Governmental supports such as the First Time Buyers and First Home scheme, made these homes more accessible for first-time buyers in particular. Many of the developments that Sherry FitzGerald acted for, such as Sli na Craoibe, Knocknacarra, Garri na Saili, Rahoon, Ard Raithni, Barna, 105 Salthill and Cnoc an Chaisleain, Oranmore experienced strong sales.
The problems observed in the residential market extend disproportionately to the rental sector. Landlords are continuing to leave the market in droves, not aided by the Government's recent inaction to introduce any meaningful measures in Budget 2024. Our analysis shows that over the last three months, there was an average of 46 properties available to rent on Daft.ie at any time in Galway city, for an area with a population of 85,910. This dearth in supply is what is contributing to the 11.6 per cent increase in rents recently reported by the RTB.
Looking ahead to 2024, it is clear that many of the issues facing the market are likely to persist. Rising interest rates will be a matter of concern, but an air of optimism will be present given the ECB’s recent decision not to increase further in October. It is likely that we have reached a terminal rate, meaning mortgage holders can now proceed with a greater degree of certainty surrounding repayments. However, elevated rates will impact the wider economy in terms of growth and employment – the full of effect of which is yet to be seen.
It is inevitable that demand will continue to outstrip supply. This, combined with the extension of Help to Buy and the reintroduction of Mortgage Interest Relief mean that we project 2024 to be another year of growth in the Irish property market.
If you are considering selling in 2024 feel free to contact our offices for free, confidential, and professional advice. We at Sherry FitzGerald Galway wish all our customers a very happy Christmas.
