We have spoken on many occasions over the years about the difficulties faced by prospective first-time home owners in the current market. From the inception of the more stringent rules for attaining mortgage approval, to the ever-increasing cost of living, renting and the increasing prices of homes available for purchase as demand increases and supply dwindles. With many effectively pushed out of the property market for the time being, it may come as a shock to learn that almost half of all properties sold in 2018 were paid for with cash or savings.
The latest Consumer Market Monitor from the Marketing Institute of Ireland and UCD Smurfit Business School confirms that despite a property market which remained sluggish throughout 2018, approximately 45% of all properties sold in 2018 were snapped up by cash buyers. Whilst remaining relatively sluggish, there was an increase of 8% in the amount of homes sold with 55,000 being sold and 25,000 being paid for with cash or savings. While this may seem like a rather large number of sales and a positive step for the industry, it is in fact still a massive difference to the number sold during the last boom, which reached 105,000 sales. The current numbers of cash sales in fact are more similar to those in the recession years during which mortgage approval numbers were at an all-time low.
Whilst cash buying may seem like harking back to boom times, and other areas of the economy continue to improve, the numbers actually suggest that while more mortgages are being approved than previous years, this is by no means a boom as levels remain consistently much lower than during that period.
Author of the report, Professor Mary Lambkin has said that;
“The property market’s sluggish growth does not reflect the large increase in the working population. […] While the number of homes for sale has increased, the level of property sales should be about double the current level, approaching the level that the market experienced during the early 2000s, when the workforce was about the same level as it is today.”
The cash buying phenomenon we currently find ourselves in has seen the price of modest homes skyrocket as cash buyers would appear to be more likely to purchase homes on the cheaper end of the spectrum. It is hoped that an increase in the construction of new homes will facilitate an increase in residential property sales in the coming year. As 35,000 homes are needed each year, it is hoped that construction will continue in order to begin to meet rising demand, with 23,000 new homes set to be built this year and next year.
As always, we here at EcovisDCA are available to assist should you have any queries on any business or financial matters. We look forward to hearing from you.