House prices are set to continue rising this year after the strong growth in values recorded in 2021, the latest residential market review and outlook from property advisors DNG suggests.
DNG said it was expecting regional price gains to outstrip those in Dublin where nominal values are already elevated and affordability is more challenged.
It is forecasting an average rise in regional markets of 12-13% in 2022, while price growth in Dublin will more likely be in the order of 6-8%.
DNG said the housing market will continue to be boosted by strong economic and wage growth.
It will also see boosts from the increased household savings levels seen in 2020-21, the extension of government initiatives for first time buyers, strong demand from this cohort and the prevailing low interest rate environment.
On the supply side, DNG said the supply of new residential completions is set to increase to around 26,000 units this year.
But this will still be well below the estimated 30,00-35,000 new units required each year to meet demand thereby putting upward pressure on prices in the market.
Looking at 2021, the DNG National Price Gauge (NPG) - excluding Dublin - recorded an increase in the average price of a second hand home of 13.6% last year, a marked acceleration in the rate of inflation compared to 2020 when prices rose by 1.4%.
At the national level (including Dublin) the overall rate of price increase last year stood at 12%, it added.
The NPG, which tracks house prices across the country on a half yearly basis, recorded growth of 5.3% in the six months to December 2021, compared to an increase of 7.9% in the first six months of last year.
All regions of the country saw double digit price growth in 2021, except for Dublin, with prices there up 9.9%.
The strongest rate of house price appreciation was in the Mid-West region at 17.2%, followed by the Midlands at 14.2% and the West at 13.8%.
The South East region saw the lowest rate of growth in prices last year at 11%.
Outside the capital the highest average price was found in the Mid-East (€349,259) followed by the South West (€279,844).
DNG said the average price of a resale property in Dublin now stands at €499,516 compared to €454,669 at the end of 2020, however, residential property prices in the capital remain 30% below their previous peak in 2006.
At a national level, and excluding Dublin, the average price of a second hand home now stands at €246,018.
DNG's Director of Research Paul Murgatroyd said that trice growth was clearly very robust last year across all regions and the factors that drove those increases continue to be evident in the market as we enter 2022.
"The stock of homes for sale in the second hand market remains very low by historical standards and this, combined with the elevated level of demand, brought about in part by factors linked to changing behaviours throughout the pandemic, will mean further price appreciation will be evident as we progress through the year ahead," he added.
DNG's chief executive Keith Lowe said that while the level of price growth was high last year, this is in line with property markets in most developed countries who have all experienced strong price growth during the pandemic.
"The effects of Covid 19 in terms of restrictions on both the viewing of properties and placing properties for sale in 2020 and 2021, and the closure of non-essential building sites for a long period of time led to fewer homes being available to buy," the CEO said.
"At the same time the pandemic has led to a large level of pent-up demand in the market as buyers spent less and saved more towards their deposits. This combination of restricted supply and increased demand has pushed prices to the level seen today," he added.
Mr Lowe also said that many small investors exited the market in 2021 due to high taxation levels and the regulatory burden which makes it unattractive to be a small landlord in the current market.
"This is a trend that we expect will continue this year despite strong rent levels. The property market will remain robust this year with prices likely to hit double digit growth again for the year ahead," he said.
