As part of the November KBC Bank Irish consumer sentiment survey, we asked a number of supplementary questions regarding the impact of Covid-19 on housing demand.

Analysis by Austin Hughes

It should be noted that responses reflect views from the broad population of Irish consumers rather than just those contemplating a property purchase. As such, the survey gives a general sense as to how the pandemic has affected Irish consumer thinking on property purchase.

The results suggest an increased focus on living conditions that would likely act to boost property demand by a significant cohort of consumers but also suggest significant numbers see Covid-19 impacts making property purchase  a more remote prospect for them.

In this respect, responses also highlight marked differences in thinking across the spectrum of Irish consumers that likely reflect changes in circumstances that emphasise the uneven impact of the pandemic on income and employment prospects and, consequently, the accessibility of home purchase. 

The survey results that hint at a clear split in the circumstances of the potential pool of Irish home-buyers may go a little way towards explaining the contrast between a sharp drop in housing transactions and a comparatively resilient trend in property prices (although other factors such as the impact of restrictions on the home-buying process have clearly been a key influence).

Some prospective buyers-likely those whose personal financial circumstances have not been directly affected by the economic fallout  from the pandemic, appear to have intensified their interest in property purchase and become more active in their property search. Others, probably centred on those groups directly affected, now seem to regard the prospect of property purchase as more remote for them than before the pandemic.

So, the survey might suggest the  ‘intensity’ of homebuyer demand has increased among those consumers whose financial circumstances have not been hit by Covid-19, a finding that is consistent with increased mortgage applications of late, but the broader population pool from which homebuyer demand  is drawn may well have declined. Such a divergence could have played some role in underpinning property prices for the comparatively limited number of properties coming to market of late.

Among the key results were:

• 21% said the pandemic had increased the importance of living space and facilities for them while for 14% of consumers, their importance had decreased.
  • Living conditions were more likely to have increased in importance for those on higher incomes-possibly reflecting less immediate impact on incomes than those on lower incomes. 
  • Living conditions were also more likely to have increased in importance for those living in Dublin-possibly reflecting smaller living spaces.
  • Living conditions were more likely to have increased in importance for those in the 25-34, 35-44 and 18-24 age groups (in order of scale) than for older age groups-possibly reflecting greater pressures on ‘shared’ space for those with growing/older families. In contrast, some combination of greater income concerns and, perhaps, greater current living space lessened the importance of the particular characteristics of that space for those at the older end of the age spectrum.
     
• 18% said the pandemic had made them willing to spend more on their accommodation but 19% said they were less willing.
  • Those on lower incomes were notably less willing to spend more on their accommodation whereas those on higher incomes were more likely to be willing to spend more on accommodation-presumably reflecting differences in the impact of the pandemic on prospects for income and employment.  
  • Those aged under 35 were more likely to be willing to spend more on accommodation-possibly reflecting  a greater desire to have their own space whereas older age groups may have feared other demands on their spending power would increase.
     
• 22% said the pandemic had increased their interest in buying/moving home while for 24% it had decreased
  • Again, the responses show increased interest in home-buying is positively correlated with income. The survey suggests the pandemic has diminished the purchase interest of those on lower incomes while those on higher incomes were more likely to have an increased interest in buying a home-this result again highlights the divergent nature of Covid-19 impacts.
  • Dublin consumers were less likely to be more interested in buying  home than their counterparts in the rest of Ireland, presumably reflecting affordability constraints.
  • The age group whose interest in purchasing a property was most likely to have increased was that of 25-34 yearolds
     
• The pandemic has increased the willingness of 16% of Irish consumers to live further from work but the willingness of 21% has decreased
  • The pandemic markedly reduced the willingness of those on lower incomes to live further from work. This result likely reflects both variations in the capacity to work from home and significant curbs on public transport.
  • The only age group to signal an increased willingness to live further from work was that of 35-44 year olds.
     
• Some 18% of consumers say that the pandemic has increased savings they can use towards house purchase but 21% say it has decreased savings capacity.
  • This result may seem somewhat surprising given the sharp rise in deposits and related commentary on potential implications for property prices but it likely reflects the uneven nature of the impacts of the pandemic across the income distribution, the temporary nature of a significant portion of ‘forced savings and the likelihood of a lasting increase in ‘precautionary’ savings.   
  • The dominant influence on these results was a sharp deterioration in savings capacity on the part of lower income consumers
  • However, home purchase savings capacity did increase for those aged 35-44. As a result, it is possible that these results could be consistent with some increased effective demand for housing reflecting the increased purchasing power of a small cohort of prospective home purchasers that outweighs the reduced capacity of those on lower income looking to enter the property market.
     
• 27% of consumers think that Covid-19 has increased prices for the sort of property they would be interested in buying whereas 15% think prices have eased. 
  • Across all age and income groups, significantly more consumers feel price pressures had increased rather than declined since the pandemic. This may reflect a greater focus on particular elements of a property (eg inside and outside space, orientation, local amenities) that have translated into more concentrated demand for a narrower range of properties. In the same vein, 28% of prospective renters felt  rents for the sort of property they wanted had increased since the pandemic.
     
• The survey results outlined above focus on those who say their views on property purchase have been altered by the pandemic. As the results indicate, the pandemic has affected the thinking of substantial numbers of Irish consumers on homebuying. However, it should also be acknowledged that, in most instances, the results show the majority of consumers have indicated their views have not changed or they are uncertain about their positions on these issues.
  • Reflecting the smaller samples for specific age and income groups, we would emphasise the qualitative aspects of the findings rather than precise numerical estimates
  • The responses discussed above were given to supplementary questions in the November tranche of the KBC Bank consumer sentiment survey based on a nationally representative survey of 1000 adults carried out for KBC Bank by Core research between November 2nd and 13th.