House prices in Ireland have risen more in the first six months of 2017 than in the whole of last year. In June the average list price of a house was 8.8 per cent higher than in December while compared to the first quarter of this year, house prices in April, May and June have risen by 4.3 per cent.
According to a report from property website Daft.ie, the national average list price in the period was €240,000, 11.7 per cent higher than a year previously and over 46 per cent higher than the lowest level recorded in 2013.
Speaking to The Irish Times, Daft.ie economist Ronan Lyons said that we're unlikely to see a stabilisation of prices in Ireland's property market in the next five to 10 years unless drastic action is taken.
Mr Lyons said that prices in Dublin will continue to drift upwards at a faster rate than the rest of the country because “we’ve regulated ourselves out of the volume of homes that are needed”. He added that Dublin doesn’t necessarily need any more three bedroom semi-detached properties but the properties it does need, like apartments, are the most difficult to build and the most heavily regulated.
Heavy regulation
While he believes this isn’t a bubble, on the basis that it doesn’t mirror the loose lending practices of the 1990s, he doesn’t think the market is healthy either. “You could see the market stabilising if there’s more supply further away from cities. While there might be enough homes, if they’re not in the right places that could temper house price inflation, but you’re still left with the ongoing problem of the draw of big cities coupled with heavy regulation,” he added.
For the first time in over two years, the annual rate of house price inflation in Dublin exceeded the rate elsewhere in the country at 12.3 per cent.
However, in terms of the yearly percentage change in asking prices, it was Longford that recorded the most significant jump with asking prices rising by 23.5 per cent. In Donegal, the average asking price of a property was over €145,000, a yearly increase of 5 per cent – the lowest in this survey.
In the second quarter of 2017 it was south county Dublin that recorded the highest asking prices across the country. The average price of over €563,000 represents an increase of 8.8 per cent compared to the same period last year. But it was the city centre that recorded the biggest percentage increase in asking prices which rose by 18.2 per cent to over €299,000.
As with trends in previous surveys, the stock of properties for sale in the capital in June of this year was lower than the same period in 2016 by about 550 properties. Those properties that were on the market didn’t stay on it for long with 50 per cent of properties selling within two months.
First-time buyer mortgage rules
“If the first half of 2017 is anything to go by, price increases are likely to match or exceed those in 2014, when they rose by 14 per cent,” Mr Lyons wrote in the quarterly report.
On the Central Bank’s first-time buyer mortgage rules, Mr Lyons said someone buying a property in Dublin worth €250,000 has seen the required deposit fall by just over 10 per cent. But someone buying a property worth €660,000 has seen their deposit requirement fall by 40 per cent – from €110,000 to €66,000. If the Central Bank’s rules are maintained in their current form, the current spike in house price inflation will prove to be just that, he added.
Looking to the future, Mr Lyons suggested that the high cost of construction will continue to scupper the provision of new properties unless the new housing minister focuses on reducing those costs.
Construction cost reduction “will have beneficial effects for both market and social housing”.
“Combined with a strategy for using vacant homes, using land better and reform of housing subsidies, it is entirely possible for this country to have a healthy housing system,” Mr Lyons concluded.
