Key Post The impact of Covid-19 on house prices

Hi Brendan,

Supply remains constrained and, with respect to all of those who have suffered economically, most of them weren’t in the market to buy property anyway.

Plus, people with decent jobs probably have more money in their back pocket now than they did this time last year.

And one cannot discount the ‘Brexit dividend’; families are relocating here.

So supply and demand are driving prices.

Gordon

NoRegretsCoyote said:

You're making a testable hypothesis here.

The CSO property price index was 134.3 in February 2020. Let's say a drop of at least 5% for materiality, so you're predicting a reading of no less than 127.6 in February 2021.

@Gordon Gekko Are you willing to take the challenge and we'll see in a year's time?

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@Gordon Gekko is looking good here for the win.

The Index actually rose from the summer and was at 135.5 in October 2020.

There would want to be a collapse in prices before February 2021 for me to be right, and I don't see such a pattern in asking prices for sure.

NoRegretsCoyote said:

@Gordon Gekko is looking good here for the win.

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Agreed. I just reread the thread to edit out some of the noise, and fair play to you Gordon, you were adamant all along that house prices would not fall.

Brendan

It's not unique to Ireland, it's happened all over Europe and has caused surprise there as well.

While the world suffered its deepest postwar recession between the first and second quarters, house prices in the richest countries not only kept rising but accelerated, according to OECD figures. Data is more patchy for the third quarter, but it mostly points to further increases.

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House Prices also grow over in the US and in China

(...)
In August house prices in Germany were 11% higher than the year before; rapid growth in South Korea and parts of China has prompted the authorities to tighten restrictions on buyers. In America growth in the median price per square foot accelerated more quickly in the second quarter of 2020 than in any three-month period in the lead-up to the financial crisis of 2007-09. Three factors explain this strength: monetary policy, fiscal policy and buyers’ changing preferences. (...)

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Had a discussion with a friend of my wife over Christmas who claimed prices will fall in 2021 but I kept arguing that the ones who lost the jobs were not in the market to buy in the first place.

It's a shrinking market though in terms of volume. It's like musical chairs where the supply is constantly shrinking. But you keep adding more players to the game.

Myhome report suggests national asking prices up 6% yoy in Q4 of 2020.

NoRegretsCoyote said:

Myhome report suggests national asking prices up 6% yoy in Q4 of 2020.

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"A number of economic and policy decisions have also ensured the property market did not slump: interest rates in Ireland (and indeed across the G7 countries) have been cut to historically low levels, making it easier to borrow money. Also, Government supports have protected people’s incomes and ensured that many of those who may have sold out of necessity were not forced to do so." - Angela Keegan, Managing Director My Home.ie

I would suggest this to be the primary factor. The availability of cheap credit and sustained incomes during an economic downturn. If/when, the economy re-opens fully, the period of adjustment that returns to reduced fiscal and monetary supports will be the period of house price declines. I hate to be the harbinger of doom, but I suspect the most significant economic and societal upheaval will be felt after the health crisis dissipates.
How the economy is managed at the point of returning to more normal trading conditions will be the critical factor.

NoRegretsCoyote said:

You're making a testable hypothesis here.

The CSO property price index was 134.3 in February 2020. Let's say a drop of at least 5% for materiality, so you're predicting a reading of no less than 127.6 in February 2021.

@Gordon Gekko Are you willing to take the challenge and we'll see in a year's time?

Click to expand...

@Gordon Gekko has won easily.

The CSO's residential property prince index was 138.1 in February 2021. Not only no decline, but an increase of 3% over the year

Well done!