House price inflation is likely to climb to 12 per cent this year before falling back sharply in 2022 as supply comes on and affordability constraints kick in, the chief executive of DNG estate agents has said.
Keith Lowe said the current uptick in prices was being driven by Covid-related factors such as increased savings; the return of expatriates; and “right-sizing” .
There are also significantly fewer homes being advertised for sale, he said, noting that the number of houses available to buy nationally – as of August 1st – was 31 per cent lower than at the same point last year and 20 per cent lower in Dublin.
These factors were likely to push annual house price growth to as high as 12 per cent in the coming months, he said.
The latest official figures from the Central Statistics Office (CSO), which are based on actual transactions rather than valuations, put the annual rate of growth at 6.9 per cent in June, the highest level for 2½ years.
Mr Lowe said the official gauge was about three months behind as it typically took three month to close a house sale.
However, he said the Covid surge in prices was transitory and would unwind over the next two quarters, resulting in a significantly lower level of price growth next year. He predicted house price inflation in 2022 would be in the low single digits, 4-5 per cent.
The main moderating influence is likely to be the pick-up in supply, he said, noting new home completions are expected to be in the region of 21,000 this year, increasing to 23,000 in 2022 and 26,500 in 2023.
Supply in the second-hand market is also likely to increase as confidence returns to the sellers’ market. He said many people, particularly older people, have been scared to put their homes up for sale during the pandemic.
The other check on house price growth is likely to be affordability, Mr Lowe said. “If you can only borrow 3.5 times your salary – noted there are exceptions – that is going to control house price growth,” he said.
Many had predicted property values would decline as a result of the pandemic but the exact opposite has occurred.
Property websites MyHome.ie and Daft.ie both recorded a major pick-up in headline inflation in their latest quarterly reports as the demand for homes outstripped supply.
MyHome, which is owned by The Irish Times, said the typical asking price for a home nationally rose by 13 per cent to €303,000 in the second quarter, breaking the €300,000 mark for the first time. In Dublin the typical asking price was €412,000, up 10.6 per cent year on year.
Daft also put the annual rate of house price inflation at 13 per cent, its highest since early 2015, noting the average price of a home on its website rose by €34,000 to €284,000 year on year in the second quarter.
The official rate of price growth – as recorded by the CSO – is significantly lower as it is based on actual transactions derived from stamp-duty data filed with Revenue and not asking prices.
The Government should buy a number of privately-owned direct provision centres as a “priority” as it would be more “cost effective” for the State to run the facilities for asylum seekers, international protection officials have said.
The savings arising from owning the accommodation centres rather than paying private contractors to do so “could be considerable”, departmental briefing documents provided to Minister for Children and Integration Roderic O’Gorman last year state.
The vast majority of direct provision centres are currently owned and run by private companies, with accommodation providers having received some €1.6 billion since 1999, including €183 million last year.
The latest figures show some 7,150 people are in the system of seven State-owned sites and 39 private centres. A further 24 commercially-owned premises are being used to provide emergency accommodation for asylum seekers.
The briefing document, released to The Irish Times under the Freedom of Information Act, says that housing people seeking asylum in State-owned centres would provide the “best protection from the vulnerability of present market reliance”.
“They are also much more cost efficient to run, and the State owns the asset,” it notes.
The document suggested that State centres should aim to accommodate 5,000 people, and “allowing the private sector to supply the rest is regarded as an achievable and reasonable target”.
The purchase of existing centres from private providers “to immediately boost the State’s footprint in this area should be considered as a priority,” the internal document said.
“Some service providers may be open to this and the market appears to be favourable at present,” it said.
The internal briefing suggested the department could then seek private companies or NGOs to run the centres, which would be a “competitive cost option”.
Ongoing maintenance for centres owned by the State was also “badly needed,” as current pressures on the Office of Public Works (OPW) meant it was not possible “for immediate repairs to be done if required”.
“In exploring the model of more State centres, we need to agree and acquire a capital budget,” the briefing stated.
“State land does not require planning permission for new centres as the Minister has a power under the Acts, whereby the OPW can grant the planning permission and this is usually a three-month process. It is not subject to appeal.”
The document says that State centres “can also have a bigger footprint as it will be a permanent fixture in the locality”. In recent years a number of plans for private providers to open direct provision centres in regional towns have been met with protests from locals and anti-immigration activists.
Mr O’Gorman’s department has sought to reform the direct provision system and is seeking to replace the network of centres with a new system of accommodation and supports by the end of 2024.
A department spokesman confirmed the State has not bought any new centres since the briefing note was written. The spokesman said under the planned overhaul of direct provision, asylum-seekers who arrived into the country would initially be housed in a number of reception and integration centres.
Asylum-seekers will spend a maximum of four months in the reception centres before moving into housing secured through Approved Housing Bodies.
“These centres will be State-owned and purpose built to provide suitable accommodation for approximately 2,000 people at any one time, to cater for the flow-through of the 3,500 applicants over a 12-month period,” he said.
Attached by a strap to a safety lanyard, 27-year-old Nathan Paulin slowly progressed barefoot on a line stretched across the river between the Eiffel Tower and the Chaillot Theatre.
He stopped for a few breaks, sitting or lying on the rope.
Paulin holds an umbrella as he performs, for the second time, on a 70-metre-high slackline spanning 670 metres between the Eiffel Tower and the Theatre National de Chaillot. (Photo by Sameer Al-DOUMY / AFP)
“It wasn’t easy walking 600 metres, concentrating, with everything around, the pressure … but it was still beautiful,” he said after the performance on Saturday.
He said obtaining the necessary authorisations had been a difficulty for him, plus “the stress linked to the audience, the fact that there are a lot of people”.
Photo: (Photo by THOMAS COEX / AFP)
Paulin, holder of several world records, performed the feat to celebrate France’s annual Heritage Day – when people are invited to visit historic buildings and monuments that are usually closed to the public.
He said his motivation was “mainly to do something beautiful and to share it and also to bring a new perspective on heritage, it is to make heritage come alive”.
He had already crossed the River Seine on a tightrope, on Heritage Day in 2017.
There’s a perception that Ireland’s monster debt – it will be €240 billion by the end of the year, on a per capita basis the third highest in the world, was put there by band of rogue bankers. And that we as a people have been victims of a terrible wrong.
The truth of course is more sticky, more unpalatable than the bar stool narratives we tell ourselves.
Most of the debt – more than €100 billion – arose from a sequence of budget deficits run up in the wake of the 2008 financial crash and linked to then government’s mismanagement of the public finances, a government that we voted into office three times in succession.
The former Fianna Fáil-led administration had spent lavishly in 2000s while using windfall taxes from the property sector to plug the holes in its accounts.
When these taxes dried up, the deficit ballooned. At the height of the crisis in 2009 the deficit was €23 billion. That meant the State was spending €23 billion more than it was taking in by way of taxes and other income.
This necessitated borrowing on a grand scale, which went on – to a varying extent – for a decade until the State ran a budget surplus in 2018.
The original cost of bailing out the banks was €64 billion but this has been clawed back to around €40 billion by way of levies, dividends and share selloffs arising out of the State’s ownership of the banks.
It’s a big number, but less than half the bill foisted upon us from budgetary mismanagement, none of which can be clawed back.
On a per capita basis, the State’s debt figure equates to €46,000 for every man, woman and child in the State and €103,300 for every worker.
And the cost of servicing it has cost us €60 billion over the past decade: equivalent to three years of health spending. Make no mistake the State is paying for its boom time folly.
So it behoves us to sit up and listen when the Irish Fiscal Advisory Council (Ifac) sounds a note of caution about the Government’s budgetary strategy, particularly when it claims we’re sailing close to unsustainable debt trajectory.
And not to dismiss the council’s critique, as some do, as an act of fiscal pedantry, far removed from the realpolitik of government.
While the €4.2 billion spending hike earmarked for Budget 2022 is broadly welcomed, the council takes issue with the Government’s medium-term budgetary strategy, which envisages a series of much bigger budget deficits out to 2025 and nearly €19 billion in additional borrowing.
This will leave the State with a bigger and less manageable debt up the line and therefore more exposed to the next crisis. There was now a one in four chance of the national debt moving on to an unsustainable trajectory in the years ahead, it said.
The council also warned that borrowing and ramping up spending during a strong recovery could “backfire” triggering an acceleration in prices if capacity constraints, most notably in the construction sector, bite.
You would think that as a country with a big debt, the chief threat here is rising interest rates, something that is likely to arise if the current pick-up in inflation proves longer than expected.
Ifac has stress-tested the Irish economy against possible interest rate hikes and growth shocks, finding the latter poses a greater problem.
While a big 2 percentage point shock to the Government’s borrowing costs would add just 0.4 percentage points to the debt ratio in three years it would barely raise annual funding costs. This is largely because the National Treasury Management Agency (NTMA) bond issuance is long-dated and, in the main, fixed rate.
In contrast a typical growth shock of 3.6 per cent for two years could add over 20 percentage points to the debt ratio in three years. “With high debt ratios to begin with, this could snowball and make it difficult to pull down debt ratios in later years,” it said.
Two years ago, NTMA chief Conor O’Kelly was asked what the chief financial risks facing the agency were and if it had a Brexit contingency plan.
He said the agency operated on “permanent contingency” basis . As a small, highly-indebted economy, which relies on international investors for 90 per cent of its borrowings, he said Ireland and the NTMA needed to be in a permanent state of crisis readiness.
The reality is that the next shock, the next thing that will hit our funding market, will probably be something that we have not yet thought of and is not on the front page of every newspaper in the world, O’Kelly said. Nine months later, the Covid crisis hit and the global economy fell off a cliff and the NTMA’s borrowing plans were out the window.
This goes to the heart of Ifac’s commentary: it’s not a case of wondering if there will be another recession or if there will be another financial shock, that’s a given, they’re coming on average every 10 years.
Downturns are part of the natural cycle, financial shocks are part of the global economy. The question is, will you be in a position to borrow and spend your way out of it.