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ALMOST HALF OF all properties sold last year were bought with cash or savings, according to new data.
The latest quarterly Consumer Market Monitor (CMM) report, published today by the Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School, shows that 55,000 homes were purchased last year, an increase of 8%.
In 2018, 25,000 properties were bought with cash or savings, similar to the level of cash purchases made during the recession years, 2009-2013.
The CMM report also shows that there was an increase of 12% in the number of mortgages issued during 2018, with 30,629 drawn down, but again this is a considerably lower level than during the last boom, with 85,000 mortgages issued in 2005 and similar levels in 2006 and 2007.
While the property market has continued to grow year on year, the reports show that 50,000 fewer homes were bought last year than at height of the boom in 2005.
However, the CMM report authors say sales should be about double the current level as there is a high demand for property with Ireland’s growing workforce.
According to the CMM report, since 2012 there have been 430,000 new jobs created while the annual rate of new household formation is at approximately 35,000.
Construction has picked up in recent years, with 15,000 new units built in 2017, 18,000 new units built in 2018 and another 20,000 and 23,000 new homes set to come on stream in 2019 and 2020 respectively.
Based on the rate of new household formation, construction levels fall short of the number required to bring housing demand and supply into balance.
The authors have said that 350,000 new homes are needed over the next decade to satisfy demand.
“The property market’s sluggish growth does not reflect the large increase in the working population and the rate of new household formation that has occurred over the past five years,” Professor Mary Lambkin, author of the report, said.
While the number of homes for sale has increased to about 23,500, the level of property sales should be about double the current level, approaching the level that the market experienced during the early 2000s when the workforce was about the same level as it is today.
The residential property market peaked in 2005 when 105,000 homes were sold and 85,000 mortgages were issued to owner-occupiers. In 2011, it fell to its lowest point when just 25,700 properties were sold and 10,500 mortgages were issued
Since 2014, sales have increased by 8% per year, on average. First-time buyers have accounted for over 60% of all sales during this period.
It’s anticipated that sales will increase by a further 5% this year to 58,000, facilitated by the increasing rate of construction of new homes as well as an increasing supply of second-hand properties coming on the market.
Tom Trainor, chief executive of the Marketing Institute of Ireland, said the outlook this year is largely positive “with fundamental economic conditions remaining strong and likely to continue to drive employment and income growth”.
The risk of a hard Brexit is weakening consumer confidence, in turn moderating the outlook for spending. But also, the mismatch between property supply and demand means home prices and rents are likely to outpace pay and will hit disposable income.