People continue to flock to the countryside to buy and build, contributing to about half of the property price increases witnessed during the pandemic.
A Bank of England analysis of the 13 per cent rise in UK property prices from June 2020 to June 2021 shows three factors have contributed to the race for space during the pandemic.
The first was a shift towards detached homes (as transactions for apartments decreased), which explained about 10 per cent of house price growth since January 2020.
Buyers were also willing to pay a premium for a house as opposed to a flat with similar characteristics, accounting for about 20 per cent of price growth.
Indeed, detached homes are at their most popular since 2002. According to the National House Building Council, more than 36 per cent of new homes registered to be built in the third quarter of 2021 were detached.
The third factor was, broadly speaking, a reduction in the price gap between identical properties in urban (London) versus rural areas, accounting for about 15 per cent of the increase.
Situation in Ireland
In 2021, house prices in both NI and ROI were up on 2020. Nationwide’s latest house price index put the average home in NI at £167,479 for the final quarter of the year, 12.1 per cent, or £18,096 above the fourth quarter (Q4) of 2020.
The building society said UK wide, house prices rose by nearly £24,000 to £254,822 during 2021, the biggest increase ever recorded in a single year in cash terms.
In ROI, the Central Statistics Office recorded a 13.5 per cent rise in house prices in October from a year earlier. In a report on Glenveagh Properties, the Irish Examiner attributed the increase to building material cost rises.
However the housing developer is not so much worried about inflation in the longer term, but about labour shortages.
Beyond material price increases, analysts are also concerned about the cost of borrowing increasing. It fell during the pandemic after a decade of low interest rates but is expected to rise as central banks try to keep a lid on inflation.
No more Covid shutdowns
ROI’s Housing minister vowed not to shut down residential construction sites, as Taoiseach Micheál Martin said his greatest regret in office had been imposing construction site closures for house building.
Housing Minister Darragh O’Brien revealed 800 houses a week were lost during four months of the building sector shutdown in 2020.