The latest Daft.ie House Price Report is out today and, for most readers, its headline findings will be unsurprising. Prices rose in the first quarter of the year – compared to either the previous quarter or the same time last year – in almost all of the 54 markets covered by the report.
Closely related to this, the availability of property – especially outside the cities – continues to dwindle. While the number of homes on the market in Dublin is actually up, year-on-year, from roughly 2,700 to about 3,500, elsewhere it continues to fall.
Outside Dublin, there are just 16,800 homes on the market – the lowest ever recorded, since Daft.ie started recording the total number of properties on the market, back in January 2007.
The overall pattern is clear: given there is strong demand for housing countrywide, the lack of supply – especially of newly built homes – is driving prices up. But not everywhere is experiencing the same growth in housing demand.
Dublin is seeing increasing stock on the market – especially as the new homes segment shows on-going signs of recovery. But nonetheless, the increase in prices there in the last year, 8.4%, was greater than elsewhere in the country (6.5%).
This is each area of the country is really its own local market, with factors – such as proximity to jobs or to amenities like schools or transport – that determine whether demand is stronger or weaker than the national average.
The Daft.ie Report breaks down the country into almost 400 “micro-markets”. 117 of those are in Dublin, with a further 39 in the other four cities and the remaining 233 spread across the country – 89 in Leinster, 76 in Munster and 68 in Connacht-Ulster.
For each of these micro-markets, it is possible to trace the path of the average sale price of housing. These averages are independent of changes in the mix of properties listed for sale, so differences over time are not being driven by more four beds or fewer apartments on the market.
The figure accompanying this piece shows the twenty hottest and twenty coolest markets in the country, as measured by how much prices have increased in the last year. At the hottest end of the market, there is a real mix of areas. Some are in Dublin – in particular around Dublin 8, where the South Circular Road, Portobello, Rialto and Harold’s Cross are all seeing very strong increases.
Smithfield and Cabra, close to the new Luas, Rathgar and Loughlinstown are also among the areas seeing the biggest increases – but there are plenty of areas outside Dublin where prices are rising rapidly.
These include rural Westmeath, Mountbellew and Gort in Galway, and North Kerry, as well as Watergrasshill and Mitchelstown in Cork.
Switching to the coolest market, there are a number of areas where average list prices now are below those a year ago. While this may seem odd, given the strength of demand, when breaking up the country where prices are increasing by 7% a year into almost 400 markets, it is to be expected that there will be some with prices falling.
Some of the falls represent a market taking a step back, after very strong increases a year ago that – it seems from trends this year – were not sustainable. This includes the Beare Peninsula, Sligo’s suburbs, and Tara, in Meath, where prices a year ago were increasing at rates above 20% a year.
This alone should suggest some caution against assuming that the areas now seeing very fast growth will keep all that price growth in the quarters to come.
Nonetheless, like Dublin 8 in the hot markets, there are clear patterns among the cold markets. Six of the 20 coldest markets are in Donegal and a further four are near the border, including North-East Louth and Cootehill.
If this border turned hard with Brexit in the near future, these would be the areas most affected by being cut off from obvious trading partners down the road.
Of the other colder markets, one thing jumps out: distance from jobs. While the part of Tipperary closest to Limerick city is seeing prices grow strongly, there are parts of the same county further south where prices are falling back. Similarly, areas like Foxford or South Leitrim do not have good connections to major urban centres.
Irish politicians would like to be able to overturn the laws of economics and get lots of well-paying jobs in Ireland’s smaller towns. But clustering is everything in the modern economy. The best hope of bringing about a population increase in such locations is to make their closest cities bigger and closer.
But how can you move Leitrim closer to a city? Transport infrastructure is the only way that this can be done. House prices in Laois have risen much more than in Offaly in recent years, as it benefited from better motorway access than its neighbour.
Motorway-led development, though, brings sprawl, with personal and environmental costs that may be too high to make it worthwhile.
For that reason, it may be best to allow Ireland’s cities to continue to be successful. Bigger cities can sustain larger hinterlands around them. So it is in the interests of Leitrim and Tipperary to see Galway, Cork and Dublin continue to grab huge shares of the global FDI jobs on offer.