The Republic of Ireland is currently under attack, not from an invading Army but, from the novel Coronavirus also known as COVID-19. But she is not alone in this. This virus, which started in a region in China, has sent shockwaves across the world with far-reaching consequences.
Ireland, just like many nations hard to ‘lockdown’ in a bid to contain the virus. But that came with a price, that price was the Economy. With the economy grinding to a halt, businesses both big and small across various sectors are taking the hit, with many on life support. One of those sectors is the Real Estate Market.
But this is not the first time this sector will be experiencing such. The Irish housing market was just pulling through the 4 years ‘crisis’ of BREXIT and then COVID-19 shows up, posing even more threat for both the nation’s health and wealth. Indeed, this crisis makes Brexit bland in comparison.
According to official of theAA insurance, ”With the businesses unavoidably shutting down because of the lockdown, there was an anticipation of widespread collapses in sales but the property market did not respond badly.” Most sales agreed before the Corona crisis became ‘famous’ are continued in good faith.
Buyers and sellers took advantage of the new virtual channels of operation via the internet because of the social distancing rules. Even though it didn’t fail as expected, the negative impact of the crisis was obvious.
There is some hope that we can completely bounce out of this storm but that is if the crisis is effectively managed enough to gradually reopen the economy. At the moment the most important thought in everyone’s mind is the direction prices will go. Nobody knows for certain.
The property ‘experts’ within the industry are ‘keeping hope alive’ by putting up a bold face but many ‘outsiders’ are already calling for a ‘price correction’ that would reflect the ‘reality’. Where we go from here depends on the events that ensue.
If the prices must stay strong, then the following should be considered.
- Keeping Demand Strong
The lockdown was a mixed bag. On one hand, it gave Families the lifelong opportunity to spend time together but on the other hand, it put a strain on families in a too-small house.
The latter exposed the need for these families to up-size their homes. This and the activities of those who want to take advantage of ‘price correction’ have contributed to the increase in demand which can keep the demand stable.
- Supply Remains Tight
To keep the supply tight, shut down of construction sites need to be reconsidered to avoid a dry up in the construction of new homes. This is greatly correct the mismatch between Demand and Supply.
- Lending Gets Cheaper
A cheaper lending rate at this time has a positive longer-term effect on the housing market. With the ECB reacting to the crisis by slashing their base interest rates to negative territory, David McWilliams is urging Ireland to use this historic opportunity to recapitalize our banks and drop interest rates.’ This will give ‘first-timers’ easy access to themarket leading to a boom in the sector.
On the converse, we might witness a drastic fall in price if the following events occur.
- Mass Unemployment
With the global economy shutting down and most business on life support, unemployment has been on the rise. You can bet no one will be qualifying for a mortgage in that situation, or willing to commit to such a major financial decision as a house purchase.
- Collapse in Confidence
While Ireland and the rest of Europe have had a grip on the virus, the same cannot be said of our neighbors and trading partners; the UK and the US. Even with low cross-border transactions that will directly impact Irish activity, the sight of a major house price crisis in nearby markets can introduce panic into the Irish market with a terrible effect on consumer confidence.
- Global Recession / Depression
A global Recession looms as the result of the economic shutdown. Even though Ireland gets a grip on its economy as it tries to reopen, it’s not still safe. Because the world financial system is interconnected, a failure of the US economy, which is the financial heart of the world will have a ripple effect on our Nation.
There is therefore no certainty in the housing market but if you need to make a move, do it when the timing is right for you and when you finally make the move to buy a home, remember to secure it with reliable home insurance because times are indeed uncertain.