Experts cautious about 2021 property market
Property prices are predicted to take a minor dip in 2021 before recovering to current levels by the end of next year, according to two leading experts.
They say confidence in the market is likely to drop slightly during next year as a direct result of the pandemic and as a consequence of uncertainty over people’s financial futures and the continuation of government Covid-19 payments.
However, they say increased savings among professionals who stayed in employment since last March, stable property prices during 2020 and an increased supply of homes next year should help to stabilise the market.
Mortgage broker and financial adviser Michael Dowling, managing director of Dowling Financial, said availability of housing remains an issue but added there should be an increase in the nation’s housing stock next year.
“More second-hand stock will become available in 2021 because people have been waiting for Covid-19 to ease.
“Earlier in the year people were reluctant to come to market and sell because the pandemic restrictions meant it was difficult for people to view houses.
“But now viewings can happen and next year we are likely to see those homes that people want to sell but have been holding back on.
“That should help ease the pressure some bit.”
He said new builds will also help supply.
Before the pandemic it was expected about 25,000 new builds would come to the market this year.
This figure is now likely to fall shy of 20,000, however, because of the interruptions brought about by Covid-19 restrictions.
Most commentators say the country needs to produce between 30,000 and 35,000 new homes annually to meet demand.
“The halting of building work at the height of the pandemic means the number of completions this year won’t be as high as we predicted.
“But I think builders have proved they can work well with Covid-19 guidelines, so unless a significant outbreak in 2021 interrupts construction again we should see more new builds next year and in excess of 20,000 new homes delivered.
“And that’s going in the right direction.” However, he does suggest there will be other challenges within the residential sector.
“There are going to be higher levels of unemployment and that is likely to have an impact on some house-buyers and confidence.
“Public servants, professionals and self-employed people who continued to work through the pandemic, they will have cash but you still need people from the retail sector or hospitality, where some will have to face long-term unemployment, and that hits confidence in the market because they won’t be in a position to buy.
“Negativity from that and how people spend will feed into property prices.
“I’m not suggesting there will be significant reductions in prices, but we may see a year of two halves where those who are not buying in the first half of the year sit tight in the second half of the year to see what develops.”
Chief commercial officer and co-founder of Offr – a property technology company which digitises the buying, selling and leasing process for estate agents – Philip Farrell says first-time buyers will find themselves in competition with major international investors for new builds, especially in Dublin.
However, he said the market should continue to be stable by the end of 2021.
This tallies with 2020 outcomes. Central Statistics Office research based on sale prices filed to Revenue indicates values have remained stable in the year to October.
“There was real uncertainty this year but it still didn’t preclude first-time buyers from entering the market,” Mr Farrell said.
“I think that pattern will continue into next year and I would be surprised if values were to be any lower this time next year.
“Worst-case scenario is that we may see a slight dip in the first half of the year and a correction in the second half of the year.
“We still have pent-up demand, there are incentives for first-time buyers and there are still fewer homes being built than are needed.
“These factors, with net migration and people who have to live somewhere, means the market should stay stable over he course of 12 months.”
Mr Farrell said low interest rates will also encourage people to consider buying in 2021.
“The demand is there, the savings are there but the one thing we will have to watch out for is what happens to the sectors being supported currently by pandemic payments and government support.
“Many younger people who work in those sectors, such as retail, are primarily in the rental space.
“But negative consequences there may hit confidence at some point in 2021 and slow things down a little,” he added.
News by independent.ie, edited by Dowling Financial.
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