Irish House Price Report Q2 2023 | Daft.ie

Daft Reports

26th Jun 2023

Are prices rising or falling? Yes

For all the depth and complexity in the housing market, ultimately much of the interest comes down to one thing ‐ whether prices are rising or falling. That can be frustrating for those interested in ensuring the longer-term health of the housing system, where quantities are far more important and will drive affordable prices. But it is entirely understandable for those looking to buy or sell and who want to know what they can afford or what their home will achieve.

So, looking at the second quarter of 2023, are housing prices rising or falling? Without wanting to come off like the classic economist with 'on the one hand' and 'on the other hand', it really does depend on your perspective.

Looking at the second quarter compared to the first, prices rise ‐ and by an average of 2.4% nationally. This is not a trivial increase, almost matching the average quarterly increase in the covid surge between mid-2020 and mid-2022. And it is the first time since mid-2022 that prices have increased quarter-on-quarter.

Prices Have Increased By 2.4 Percent This Year

So that's the answer, right? Prices are going up? Not so fast unfortunately.

Housing markets exhibit quite a bit of seasonality. For example, across much of the last few years, a pattern emerged where prices typically eased back in the final quarter of the year, which is the quietest for listings, and then increased in the first three months of the new year. For that reason, year-on-year comparisons are often more solid ‐ they are also more comparable with other measures of price changes, such as inflation.

When we look at what is happening prices year-on-year, the story flips. The quarterly falls in prices ‐ especially in the final quarter of 2022 and first quarter of 2023 ‐ start to add up. At national level, annual inflation is back negative for the first time since mid-2022, albeit only marginally at -0.5%. A year ago it was +9.2%.

So compared to a year ago, prices are lower.

For me, an important additional measure to understand the 'heat' in the market is the typical gap between a dwelling's listed price on Daft.ie and its ultimate transaction price on the Property Price Register. Using Daft and PPR archives, it is possible to calculate this gap back to 2010.

For much of the period 2010-2013 ‐ as you'd expect ‐ the typical transaction price was below the same home's original listed price. During 2011, the gap was about 10%. This does not mean that agents were out when advising their clients ‐ indeed, research suggests the opposite: controlling for a property's location and size, the point-in-time gap between a listed price and a transaction price is always very close to zero.

Instead, much of the gap reflects the combination of two factors. Back in 2011, it took a significant amount of time to sell a property, especially in rural areas, and in the gap between when a property was originally listed and when it transacted, prices had changed. If the typical home in Connacht-Ulster took eight months to sell back then, during those eight months prices fell quite a bit ‐ driving a wedge between what the seller had initially set as their price and what they got.

By 2014, the Dublin market had flipped, with transaction prices typically 5% above the listed price ‐ but for much of the rest of the country, the period 2015-2019 saw on average very little gap at all between the transacted price and the initial listed price.

Covid disrupted that and by 2022, all parts of the country were seeing a premium above the listed price ‐ from 3% in the case of Connacht and Ulster to 7% in the case of Dublin. Since then, though, the market heat has cooled considerably.

In Leinster (outside Dublin), Connacht and Ulster, there is now typically no difference between the listed and transacted prices. In Munster and Dublin, there remain premiums above the listed price but they are now quite small (1% in Munster and 2% in Dublin).

Comparison Of Most Expensive Counties And Least Expensive Counties

In other words, this measure confirms that market conditions have changed considerably over the past twelve months.

Whether the latest quarterly figure represents a temporary bounce, after three weak quarters, or a resumption of strong upward pressure, remains to be seen. The labour market is incredibly strong, which translates into strong demand. But with higher interest rates, the gap between underlying demand and effective demand grows. We shall wait and see.