Rentals in Ireland rose by 11.2% in the year to May 2022, still well above pre-pandemic levels. However, double-digit inflation and sharp price gains are set to give way to greater concerns on affordability, the economic outlook and the impact of the ECB raising interest rates, according to Conall MacCoille, Chief Economist at Davy.
And based on anecdotal evidence from estate agents, he expects price inflation to slow in the second half of 2022. “However, we are unlikely to see a repeat of the Celtic tiger era as mortgage lending rules have kept the market in check. The expected rise in interest rates from the ECB, while notable, will also not have the same negative effect given the Irish market is well insulated at present,” he said.
Nevertheless, he noted that demand was still exceptionally intense, with the average time to sale agreed falling to a fresh record low of 2.6 months. The average mortgage approval rate is now €283,700 – which is above Celtic tiger levels for the first time – but the excess demand in the market means that 20% of homebuyers with mortgage approval are currently failing to secure a property each year.
“The possibility of a modest fall in Irish house prices can’t be ruled out, correcting some of the froth built up since the beginning of the pandemic. However, double-digit declines or a repeat of the Celtic Tiger era housing crash seems very unlikely. This is because the Central Bank of Ireland (CBI) rules have stopped homebuyers taking on too much debt.”