House prices rising faster outside capital
But the 13% annual hike is ‘unstable’ warns expert
HOUSE prices are rising faster outside Dublin than in the city, latest official figures show.
Annual values outside the capital picked up 13.2%, according to the Property Price Index.
While in Dublin property price inflation edged up to 12.2% from 11.9% in August.
The fastest increase was in houses in the west which soared 16.5% compared to 9.9% in Dún Laoghaire-Rathdown and 9.8% in the midwest.
But Savills estate agents’ chief economist John McCartney said of the jump: ‘House prices rising 12% and 13% per year is a fundamentally unstable situation, it is way too fast.
‘The danger is that expectations are created and that’s when we get a pile-in and that’s when you get bad decisions.’
Dublin was the region with the highest average price (€340,000) in the year to September. Of the four administrative areas of Dublin, Dún Laoghaire-Rathdown had the highest median price (€510,000).
Outside Dublin, the highest prices were in Wicklow, €295,000, and Kildare, €265,000.
The lowest prices for a dwelling were in Longford at €76,000 and Roscommon on €85,000.
The mortgage market has been key driver of higher prices, according to stockbroker Davy’s chief economist Conall MacCoille. The average loan is up by €17,000 or 9% to €206,000 from €189,000 a year ago, bank figures reveal.
But the pressure on lenders to keep mortgages in line with salaries could soon reign in house price inflation.
He said: ‘Recently released Central Bank data showed that 18% of loans now exceed the 3.5times regulatory threshold, close to the 20% allowed to do so under mortgage lending rules. ‘In short, increasing leverage in Ireland’s mortgage market has driven house prices sharply upwards, but the Central Bank’s lending rules will soon become a constraint, limiting further increases in leverage.
The desperate need for new homes to be built was highlighted in the Property Price Index which shows that of the 3,665 dwelling purchases filed with the Revenue Commissioners in September, only 638 were for new dwellings.
The number of homes sold increased by just 21 compared to a year earlier – 3,665 this year compared to 3,644 a year ago.
First-time buyers made up just over a quarter of sales (11,669) compared to more than half by owners moving house (21,856) and more than 20% of sales (8,778) were by investors.
Austin Hughes of KBC bank said: ‘Our sense is that strong increases in areas such as Galway city may have contributed to the pick-up in property price inflation outside Dublin in the September data – the CSO highlights a 16.5% annual increase in house prices in the west.
‘Such an outcome would seem to reflect a broadening regional basis of the economic recovery coupled with significant supply shortfalls in specific areas outside the capital.
‘While inadequate supply remains a key issue, we continue to emphasise the importance of a marked increase in demand as a driver of the recent pick-up in property price inflation.
He added: ‘However, a modest increase in supply seems to be falling far behind the growth in prospective home purchasers as pent-up demand seems to be emerging forcefully.’
‘That’s when you get bad decisions’