The number of new and second-hand houses changing hands has collapsed in recent months, with only 324 transactions being registered in the first half of June.
Since the post-Celtic Tiger crash, transactions in the Irish housing market have been stuck at extremely low levels. The figure of 50,886 homes, both new and second-hand, that changed hands in 2016 was virtually unchanged from the 2015 total of 50,507.
When new houses, 4,329 in 2015 and 4,293 in 2016, are excluded, only about 46,000 second-hand homes were transacted in both years.
That is the equivalent of every one of Ireland’s just over two million houses changing hands once every 43 years.
Since the publication of its Rebuilding Ireland plan almost a year ago, the Government has taken several steps aimed at improving access to housing.
These include the Help-to-Buy scheme, a 4pc cap on annual rent increases and pushing up the average annual output of new houses to 25,000 in the five years to 2021.
Unfortunately, however, Rebuilding Ireland had little to say about one of the most severe problems in the Irish housing market, the relatively tiny number of second-hand houses being bought and sold.
In a report on the housing market by estate agents Savills, published last April, its head of research, John McCartney, pointed out that housing transactions per head of population in Ireland are only a little more than half the UK level.
Despite the measures announced in the wake of the publication of Rebuilding Ireland, the situation deteriorated even further in the first quarter of 2017, when 9,880 houses changed hands, down almost 5pc on the first quarter of 2016.
However, when the 37pc increase in new builds in the first quarter of 2017 is taken into account, it can be seen that the decline in second-hand houses changing hands was even greater, down by about 7pc to 9,000.
Since then, things seem to have become even worse in the second-hand housing market. The CSO records that 1,874 homes, of which just 161 were new, changed hands in April. This was down by more than 50pc on the 3,813 properties transacted in April 2016.
Unfortunately, the latest CSO data is for April and is now more than two months old. What we do have are the figures from the Property Price Register (PPR) to the middle of June. These show that not alone has the transaction decline recorded in the first four months of 2017 continued, it has if anything intensified. The latest figures from the PPR show that 2,407 transactions were registered in May 2017, down 38pc on the May 2016 figure and that just 324 transactions were registered in the first half of June, compared to 4,011 for the whole of June 2016.
While the PPR figures come with a severe health warning, they are subject to upward revision as more transactions are registered, with some transactions not being registered for months or even years afterwards. Nevertheless, they still point to a sharp fall in transaction volumes in the housing market.
So what is happening? Why, despite a raft of Government measures, are already low housing transaction volumes falling even further?
One of the peculiarities of the Irish housing market in the immediate post-crash years was the high proportion of cash buyers, with way over half of all transactions being cash deals, rather than being funded by a mortgage loan.
Lorcan Sirr, lecturer in housing studies at DIT, believes that the most recent downturn in transaction volumes may be at least partially due to the disappearance of these cash buyers. This is despite the rapid increase in the number of new mortgages being drawn down by borrowers, with a 27pc increase in the number of new mortgages being drawn down in the first quarter.
When one excludes re-mortgaging and mortgage top-ups, 5,823 new mortgages with a combined value of €1.21bn were drawn down in the first quarter. When mortgage draw-downs are reconciled with the CSO house purchase data, it would appear that cash buyers still accounted for over 40pc of all transactions in the first quarter.
If, as Sirr believes, there are now far fewer cash buyers in the housing market, then the increase in new mortgage lending is simply being swallowed up by rising house prices and fewer cash buyers. Running faster just to stand still.
So what, if anything, can be done to increase the number of second-hand homes being bought and sold? It’s not as if there is a shortage of second-hand properties. Last year’s census counted over 183,000 vacant houses and apartments, excluding holiday homes. That’s the equivalent of 9pc of the total national housing stock.
No fewer than 31,459 of these vacant properties are located in the four Dublin local authority areas, with a further 16,566 in the four commuter counties of Wicklow, Kildare, Meath and Louth.
In other words, there are almost 48,000 vacant second-hand properties in Dublin and the surrounding counties. So why aren’t more of them changing hands?
Sirr reckons that sharply rising house prices – average Dublin house prices rose by 8pc in the year to April while average prices outside of Dublin rose by 13pc over the same period – will help ease the shortage of second-hand houses coming onto the market.
“People see prices rising and they shove their own houses onto the market,” he said.
But will these new vendors have realistic price expectations or will their properties linger unsold for months on the market instead?
Another property market analyst, who preferred not to be identified, said that there has been a major pick-up in new housebuilding since Easter “with new schemes opening up every second week”.
This analyst puts this down to very strong demand from first-time buyers and predicts that this increased activity will feed through into the CSO and PPR figures over the next six to eight weeks. However, the latest CSO figures show a 38pc decline in new house sales in April.
Even if the April figure proves to be only a temporary blip, will increased levels of new housebuilding prove sufficient to offset the abnormally low numbers of second-hand houses changing hands or is the housing market about to seize up completely?
Sunday Indo Business