Updated: May 27, 2020
It’s that time of the week again. It’s time for The Friday Feeling Review
This week we point out some interesting numbers coming out of Germany as well as an intriguing recent trend that has major implications for home buyers.
German GDP data
It was reported just this morning that there has been a 2.2% drop in German GDP in the first 3 months of 2020. This is the biggest drop in GDP in a quarter since a 4.7% drop in Q1 of 2009 as a result of the Global Financial Crisis.
As the largest economy in Europe, Germany is a bellwether for the EU as a whole. Given Germany’s famously prudent Economic Policy then this drop in GDP could be viewed as a best case scenario for other EU countries.
The most relevant implication for the Housing Market is that there is a strong correlation between GDP growth and house prices so any drop in GDP is almost surely going to be followed by a fall in house prices.
Drop in rents but rise in stock
It was reported by daft.ie this week that there has been a 2% drop in rents but that there has been an almost 41% increase in the number of properties available to rent from the same time last year.
There is almost universal agreement that the main reason for this sudden increase in the number of properties available to rent is due to properties that were previously available on AirBnB are now being advertised on daft.ie given the travel restrictions. Increased supply without any change in demand will inevitably result in decreases in price and this is what is being seen as is evident in the 2% drop in rents.
An increase in rental stock coupled with a drop in the cost of renting will result in a drop in demand for buying houses. Any drop in demand without a commensurate drop in supply will result in a drop in house prices.
Our latest Covid-19 effect prediction
We have used our proprietary model to predict the effects that a myriad of Economic factors will have on house prices in Ireland in 2020 and as of Monday this week our model predicts a 14.3% drop in Sale Prices over the next 6-9 months.
Only yesterday KBC Ireland released their own expectation of a 12% drop in house prices in 2020 albeit with a more pessimistic modelling scenario showing a 20% drop in house prices in 2020.
Until next week, Stay Safe and keep washing those hands!
Friday 15 May 2020