House prices fell for the third month in a row in May and have dropped by more than 2 per cent so far this year, writes Laura Slattery.
New figures published yesterday show that buyers paid an average of almost €2,500 less for a property last month than they did in April, as the housing market continued to slide.
An 0.8 per cent dip in prices last month takes the fall in the property market for the first five months of the year to 2.1 per cent, according to the latest house price index from Permanent TSB and the Economic and Social Research Institute (ESRI).
The decline has forced Permanent TSB and the ESRI to reduce its forecast for growth in the market in 2007 from 3-6 per cent to 0-2 per cent.
Permanent TSB's head of marketing Niall O'Grady said confusion about stamp duty in the run-up to the general election had created an unwillingness to buy among first-time buyers, leading to a sharp drop in demand for houses.
"Stamp duty, a lot of uncertainty and a loss of confidence in the general economy is putting people off buying," he said. Rising interest rates have also meant that the mortgages for which first-time buyers qualify have shrunk.
Prices paid by first-time buyers fell sharpest in May, falling 1.8 per cent to an average of €272,667. In December, the average price paid by first-time buyers was €279,000.
Mr O'Grady suggested the lower prices meant it was now a good time for first-time buyers to get on the property ladder.
But Permanent TSB and the ESRI are forecasting that prices will drop further over the next three months, before making a slight recovery.
On an annual basis, the property market is still growing, but the rate of growth has dramatically halved. The average price paid was 2.6 per cent higher in May 2007 than it was in May 2006.
But prices in April 2007 were 5.1 per cent higher than they were the previous year.
The annual rate of consumer price inflation, which was 5 per cent in May, is now almost double the annual rate of house price inflation.
The average price paid nationally for a property by all buyers in May was €304,166, down from a price tag of €310,632 in December.
Second-time buyers paid an average of €341,906 in May, down from €349,213 in December.
Property prices in Dublin fell at a faster rate than prices in the rest of the country in May, but over the past 12 months prices in Dublin have grown by a higher percentage.
In the commuter counties of Louth, Meath, Kildare and Wicklow, prices rose slightly in May but are down 3.3 per cent so far this year.