House prices fell last month for the first time in more than five years as interest rate increases and continuing uncertainty about stamp duty reform undermined the market, according to figures published yesterday. Dominic Coylereports
The Permanent TSB/ESRI house price index recorded a fall of 0.6 per cent in March. That reverse - the first monthly setback for the market as a whole since January 2002 - means property buyers paid, on average, €2,000 less last month than in February.
Nationally, the average property cost €309,071 in March - less than last October when the equivalent figure was €309,963. Prices in the first quarter of 2007 have fallen 0.5 per cent compared with growth of 3.5 per cent in the same period last year.
Over the last 12 months, prices have jumped 7.4 per cent, down from 9.5 per cent in February.
"The reduction in average national house prices in March has been reflected in all market sectors with the exception of Dublin and houses bought by first-time buyers," said Niall O'Grady, head of marketing at Permanent TSB.
"Clearly, stamp duty uncertainty together with recent European Central Bank rate rises are both impacting on demand for houses. With the issue of interest rates largely outside of our control, it's imperative now that the issue of stamp duty reform is urgently tackled, if not before the election then as soon as practicable after it."
The Permanent TSB/ESRI index is based on when mortgages are drawn down from lenders by housebuyers. This generally occurs about six weeks to two months after a sale is agreed, meaning the data published yesterday relates to market conditions in January.
The slowdown reported in the market since then on the back of the subsequent quarter point rise in interest rates and the growing clamour for action on stamp duty is unlikely to filter through to the data for a couple of months.
Davy economist Rossa White said he expected further price declines over the second quarter - leading to a rise of just 2.5 per cent for 2007 as a whole.
Prices fell significantly last month in the commuter counties of Louth, Meath, Kildare and Wicklow - down 0.8 per cent - bringing the decline in the year to date to 1.8 per cent.
Dublin property prices continued to inch ahead, climbing 0.1 per cent in March and 11.7 per cent over the past 12 months. The average home in the capital now costs €429,151. This compares with €265,767 outside Dublin where prices have fallen in four of the past five months. The annual increase outside the city is 6.7 per cent after prices slipped by 0.6 per cent last month.
The fall in prices for the commuter counties taken with the price increases in Dublin "suggests that the costs of commuting, measured both in time spent and running costs, may be viewed as now too high relative to the savings on property outside Dublin", NCB Stockbrokers said.
First-time buyers also had to pay fractionally more in March - up 0.1 per cent to €279,003. Mr White said the failure of prices for first-time buyers to dip "confirms our suspicions that developers are reluctant to cut prices for fear that others will follow suit".
"The reaction of new homes developers is clear: they are cutting supply rather than price," he added.