Increase in house prices ‘starting to slow down’

SIGNS of a cooling in the housing market are starting to show, says a new report.

Although asking prices nationally and in Dublin continue to rise, the rate at which they are increasing is beginning to slow, the myhome.ie report revealed.

Nationally, prices rose by 7.2% in the last year, while in Dublin they increased by 6.8% – compared to 11% in the previous year. The latest figures mark the slowest pace of inflation in the last two years.

Central Bank lending limits have been credited for the slowdown in inflation prices as affordability in the capital becomes stretched despite the number of houses available rising by 25% to 5,000 in the last year.

Conall MacCoille, chief economist at Davy and author of the report, said the slowdown in house price inflation should be welcomed as double-digit price growth could not be sustained over the long term.

He said: ‘The Celtic Tiger years demonstrated the folly of allowing rising leverage [borrowings] in the mortgage market to drive doubledigit house price inflation indefinitely.’

Mr MacCoille said the Central Bank’s cap on borrowing of threeand-a-half times income was ‘this time round... preventing households from chasing prices higher by taking on excessive mortgage debts’.

He said: ‘We would normally expect the slowdown in asking prices to feed through into transaction prices within the next three to six months.

‘For now we are seeing stronger price gains in less expensive areas of Dublin and among the less expensive property types. For example, onebedroom apartments in Dublin are up 11.4% on the year, but four- bedroom detached houses are only up 2.3%.’

Nationally, the number of houses on the market grew by 3.7% to 21,600 properties. This is still far short of the nation’s housing needs.

The median asking price for a house is €270,000 nationally and €384,000 in Dublin, while the number of transactions over €1million has risen 25% in the last year.

The property report predicts that residential property prices will rise by 8% this year.

Despite this, Mr MacCoille said Ireland still faces a housing shortage but added that the debate on how to solve the crisis is moving in the right direction.

‘Of course, Ireland still faces an acute housing shortage but unlike the past there is a more sensible debate on how to solve the problem,’ he said.

‘Short-term ineffectual measures from the early 2000s such as allowing increased leverage on mortgage loans, tax breaks, or mortgage interest relief have been left by the wayside.

‘Instead, the debate has focused on planning reform, housing density and efficient use of State land and infrastructure funds.’

Angela Keegan, managing director of the myhome.ie property website, said the data shows the lending restrictions have not adversely impacted on the market.

She said: ‘While some thought the lending rules would hold back activity, figures from the Property Price Register show transactions in the first five months of 2018 were up 6% and that the increase for the year may well be closer to 10%, bringing the level of transactions for the year to 60,000.

‘We are still clearly in the midst of a housing crisis, [but] all the key indicators are moving in the right direction as we inch closer to a normally functioning property market.’

‘Double-digit growth is unsustainable’