Even when lockdown is over, housing market faces major upheaval

Mark Keenan

With the growth of remote working, many people have been returning to their home counties and are paying cheaper rents. Photo: Stock.

April 01 2021 02:30 AM

Along with a lockdown of our personal lives and the economy, Covid-19 has also heated up the temperature of Ireland’s property market through a series of irregularities, some of which are expected to dissipate when the country returns to normal. Some won’t.

The biggest issue currently is supply – the Real Estate Alliance (REA) network estimates supply is down by almost 40pc on a normal year.

At the same time we are entering the peak spring-summer sales season in the property market when most people look to buy and sell their houses.

Ironically, while vendors have been postponing the sale of their home because they don’t want strangers walking through them, lockdown rules have actually prevented this.

Buyers are now being forced both to view homes and bid for them without ever setting foot inside. The forced move towards a virtual-property-sales economy has revealed another unexpected factor – buyers who are buying online are getting a touch of Amazon fever.

It is becoming increasingly obvious that some home hunters are bidding for more than one home at the same time. The speed and number of bids rendered by a no-visit, all-virtual process is believed to be contributing to artificial inflation to some degree.

And there is also a level of panic among buyers. Those who have been given six-month mortgage approvals are still living in fear that banks will change their tune on lending and leave them high and dry.

Finally comes the enforced move to home working, which is affecting the type of homes people now want to buy. It is becoming increasingly apparent that some degree of home working will stick around after Covid-19.

This week, Rural Affairs Minister Heather Humphreys revealed plans for new incentives for home working to help people buy homes in towns and remote parts of Ireland, as well as news that the Government will push to have 20pc of civil servants working at home.

Tenant professionals in Dublin have already returned to their home counties in numbers, leaving landlords high and dry for inflated rents, and many have been buying more affordable property at home.

This has, in part, accounted for the higher pace of regional price inflation in the past year. But when Covid-19 is gone there will be new ripples to navigate. As the Government withdraws Covid supports and protections for businesses, some businesses won’t be back.

There will be some flux in the job market. But, most of all, vendors who withheld their homes from market through the last year will be coming back to market – possibly all at once.

In addition, the new homes tap that had been shut off by Covid-19 will be turned on at full flow when the virus is gone, again adding to supply going forward.

So, after Covid-19, we would end up in a situation for some months where, instead of supply being down by more than one-third, it could end up increasing by 100pc for a temporary period.

As the flood of postponed vendors returning to the market will take some time to dissipate, it would likely have the power to decrease prices, if only for a certain amount of time. So prices could be unstable for a period after we are released from lockdown.

It also means that those Covid-19-postponed vendors may end up actually getting less for their homes when they do come back to market. As our REA data shows, it might be wiser to sell during the current Covid-19 shortage.

There are indicators, however, that supply is already beginning to ease as some vendors decide they have waited long enough.

The eventual effects on the market will be determined on whether our release from Covid-19 restrictions is sudden or more gradual. The latter means a more gradual release of pent-up supply.

Finally, the big unknown here is the potential buyer.