Have property prices peaked? Limerick estate agents reflect on 2022 and look at the year ahead

LIMERICK estate agents were entitled to raise a glass of bubbles or two on New Year’s Eve after a largely buoyant 12 months despite the uncertain times we live in.

The property market in Limerick came through Covid unscathed - it actually boomed as people saved more and some decided to sell their Dublin house and work from home in the Mid-West. The war in Ukraine didn’t dampen demand either but the consequences will be further down the line. Ailbhe O’Malley, Sherry FitzGerald Limerick; GVM’s Tom and Paul Crosse; Lisa Kearney, Rooney Auctioneers and Pat Dooley, REA Dooley, all shared their thoughts with Limerick Live.

One subject they all address is housing stock and the lack thereof. Ms O’Malley said the war in Ukraine and associated economic challenges have all created increased uncertainty in all aspects of life.

“For property, the most direct impact of uncertainty was on construction. While house completions are expected to reach 26,000 this year (2022), the anticipated precipitous recovery in supply in 2023 and beyond is now less likely.

“As such, a significant supply deficit will persist.

“The scale of this undersupply in Limerick is evident in the fact that there were only 610 properties for sale in Limerick city and county in July 2022, representing only 0.8% of the county’s housing stock. This represents a 31% decrease on pre-pandemic levels in 2019,” said Ms O’Malley.

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Such low levels of supply have resulted in a period of above trend price inflation although it slowed in the last quarter of 2022. Further price inflation in low single digits is expected in the Limerick market in 2023, she said.

“As we look ahead to the New Year, unfortunately, many of the challenges currently facing the market will continue to persist. The wider economy is expected to slow significantly because of the tightening of monetary policy.

“Construction activity looks set to drop off as firms must now tackle both input price inflation and the rising cost of borrowing, making many projects less viable in the current market. All these factors will only further exacerbate the issue of supply.

“Despite these concerns, demand is anticipated to continue to significantly outstrip supply both nationally, and in Limerick. The easing of the macroprudential rules will ensure that demand remains strong as borrowers can make use of higher loan-to-income limits. Mortgage rates also remain relatively low in a historical context, despite recent increases,” said Ms O’Malley.

Ms Kearney said the new rule will allow first-time buyers to borrow four times their income and non-first-time buyers to borrow 90% of the value of the property up from 80%.

“A buyer on the old rule on an income of €50,000 could only borrow €175,000. The new rule will allow them to borrow €200,000,” she explains.

But it is no good being mortgage approved if the type of house you want, within reason, isn’t available to buy.

“The lack of supply has been a relatively constant feature in the market throughout the last five years but has increased marginally in the last year,” said Ms Kearney, who has noticed an increased interest in new homes from people who have been unsuccessful in bidding on second-hand homes.

“They are attracted by the price certainty and success in securing a new home,” said Ms Kearney.

As well as the recent necessity of high speed broadband, interestingly, she says the BER rating is now a big consideration in buying due to rising energy costs and in valuations for mortgages.

“Demand is still buoyant albeit at a less frenetic level as properties here are viewed as good value and reasonably priced compared to other cities. Rising rents and shortage of accommodation has fuelled the demand for homes across Limerick city and county,” said Ms Kearney.

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GVM’s Tom Crosse continues this point as he says rents are gone so high, notwithstanding the fact people can't get rental accommodation, that an average sem-d is costing up to €2,000 a month to rent.

“Mortgage repayments are well below that - the average is €1,100 per month. The moral of the story is you can get on the ladder, have your own home, have security of tenure, not be under threat of being evicted or landlord selling - there are a huge amount of advantages in owning your own home.

“Historically after every aggressive price increase there has been a correction.

“A lot of people predicted in the autumn there would be a correction but the indicators in the last few weeks would suggest it might just plateau. People will continue to buy but prices have topped out. It is now coming down to an affordability factor. How far more can a three bed semi-d go? said Mr Crosse.

His son, Paul, has excellent insight as he is selling new homes in Castletroy and Kildare.

“Kildare would be on a par with Limerick and maybe slightly behind. An average 3 bed semi in Kildare would be €365k; a strong site in Castletroy would be ahead, around €385k,” said Paul Crosse, who has racked up €5m in sales in the last two months in Newtown Meadows, Castletroy which is under construction. The father and son have seen people buying a house and two families moving in to support a mortgage.

Tom Crosse predicts that prices will continue at the same level or perhaps increase at a modest level.

“Supply is the issue. We are not building enough houses - that is the bottom line,” he stresses.

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Wrapping matters up for us is Pat Dooley who says prices rose 10% from January to December with a slowdown at the end of the year

“We have seen more listings coming up in the last quarter but the cohort of purchasers out there seems to be dropping even though prices are still staying strong,” said Mr Dooley.

He also pointed to the easing of mortgage rules which will “bring back a lot of first-time buyers to the market who would have been priced out”. But on the other hand is the “problem with rising interest rates”.

“I believe 2023 will be a year of growth albeit at a lower level,” concluded Mr Dooley.