House prices are growing faster than they did last year and an end of 2000 increase of 21 per cent is likely given current trends, Irish Permanent chief executive Mr Billy Kane said yesterday.
The latest figures for the Irish Permanent house price index, compiled in association with the Economic and Social Research Institute, show house prices rose by 10.4 per cent in the first half of this year, compared to 7.3 per cent for the same period last year. The rate of increase during June was 1.8 per cent, the same rate recorded for May.
Dublin house prices rose by 3.4 per cent in June, according to the study, while in the rest of the State a lower rise of 1.5 per cent was recorded. Across the State the prices of second-hand houses are increasing faster than the prices of new houses. Mr Kane said it was hard to see end-ofyear growth in house prices being less than 21 per cent. The comparable figures for 1999 and 1998 were 17.9 per cent and just under 30 per cent respectively. "We are all concerned that house price growth has escalated again," he added.
The Bacon reports had "played their part" and there had been a general drop in the rate of growth last year. "Who is to say that if the Bacon initiatives hadn't been taken, the situation wouldn't be worse?"
The Irish Permanent figures differ with Department of Environment figures released last month which indicated house prices fell in the first three months of the year in Dublin and the prices of second-hand houses outside Dublin also fell. The price of a new house outside Dublin rose by 1.6 per cent during the same period, according to the Department.
Despite the price increases, the ratio between the average loan and the price of the average house was declining. It was now 72 per cent for first-time buyers and 47 per cent for second-time buyers, said Mr Kane.
Asked about the pressure new buyers would be under if there were a 2 per cent increase in mortgage interest rates, Mr Kane said that 50 per cent of mortgages were now fixed. He said that given the lower interest and taxation rates which now existed, most people were spending less of their take-home pay on their mortgages than had been the case in the 1980s or early 1990s.
As the European Central Bank left interest rates unchanged at a meeting of its governing council in Frankfurt, Mr Kane said there "probably" would be an increase in interest rates of about 0.5 per cent this year.
The percentage of lending to investors is now at about 10 per cent and would have averaged 12 to 15 per cent in the past. The impact of the Bacon report on the investor market had been "huge", he said.
While the rate of increase in house prices was of concern, Mr Kane said the economy was growing and employment was growing and it was hard to see any "landmines". Last year, the Irish Permanent launched an index for Cork. Prices in Cork rose by 2.1 per cent in the second quarter of this year, according to the index, compared to 8.5 per cent in the first quarter. For the year to date, prices have increased by 10.8 per cent, compared to 6.5 per cent for the same period last year.
