Property Market Outlook

What now for the property market ?

Everywhere you look you seem to see predictions of recession for 2023. But our view is that this is now not a given in Ireland. The record amounts of taxation collected in 2022 point to a very strong economy and has provided the government ammunition to further boost the economy if needed. The key energy prices that drove much of the worry in 2022 are down nearly 50% since summer 2022. Employment remains strong. We believe inflation will fall in 2023 – not to 2% but below the 9% we see today. If the ECB could get inflation to a 4%-5% range in 2023 we believe they would be happy and would not need to raise rates further once this level is achieved. So how will this forecast impact the key sections below

1.     House Prices :

House prices will continue to increase. Anyone waiting for a fall in the property market will be disappointed. The combination of steady employment levels, record tax intake, continued under supply and crucially, and uniquely to Ireland, the change in the Central Banks lending rules that kick in from January 1st 2023, will see a further increase in prices. All the above factors will push prices upwards, on the downside the major issue is mortgage lending rates which we do expect to rise in Q1 2023. Expect rates starting with a 4%+ with most lenders from Q2 2023 and to remain at that level for some time to come.

Additionally, the number of properties available to buy is still below long term norms and even with ~28k properties expected to be built in 2022 the outlook is for 2023 and 2024 to be below this level – putting further upward pressure on prices.

2.     Interest Rates :

As tracker rate holders will know the current ECB rate is 2.5% up from zero less than 7 months ago. This has added a substantial amount to monthly mortgage repayments. These rate increases have been immediately passed onto tracker customers – yet strangely the main 3 Banks (AIB,BOI,PTSB) have not increased their variable and fixed rates by anywhere near 2.5%. What’s going on ?

It’s just a matter of time unfortunately. We expect the ECB will likely increase its main rate to 3% plus during 2023 and this would likely mean mortgage rates offered by Irish Banks starting at high 4%.

One of the impacts of Covid is that the main Banks are stuffed full of deposits – which is now where they fund their own mortgages from – meaning they have much greater control of the mortgage rates on their fixed and variable term products. They COULD choose to keep mortgage rates low – the offset of this would be that they would need to keep deposit interest rates near zero too. But unfortunately, this is an unlikely scenario as Banks can make more money hiking rates and with the lack of Banking competition in Ireland – higher rates are our base case scenario.

For anybody who has taken a mortgage in the last 4/5 years and their fixed rate is coming to an end, this is going to mean a substantial increase in the monthly repayments. Its best to get ahead of this rather than waiting for your fixed term to end so contact us today to see what the best option for you is. Dont wait for changes in the property market – it could be too late then.

3.     What should I do next ?

It will very much depend on your personal circumstances. The days of the ultra-cheap long term mortgages are over. If you have a fixed rate coming to an end within the next 2 years its definitely worth getting in touch with us to discuss your options. Trading up or equity releases will now be less attractive than this time last year but will still be right for some people. Again, its very much on a case by case basis so its no harm to give us a call and find out what is the best option for you.We can discuss your circumstances or the broader property market.

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