House price inf lation slows as rate rises bite

Property market stabilises but ‘much more difficult’ to get a loan

HOUSE price increases have slowed to €1,000 a month over the past year as spiralling interest rates and the supply of new homes starts to affect the market, a new report shows.

The study from property website MyHome.ie suggests the housing market has started to slow as activity levels return to seasonal norms.

In the year to the end of September, the average national asking price stood at €320,000 which is €12,000 more than at the same point last year. However, in the 12 months to the end of September 2021, average prices were shooting up by €2,167 a month as the national average asking price increased by €26,000 from €282,000 to €308,000.

In Dublin, the average asking price increased to €420,000, compared to €414,000 last year. Outside Dublin, the average was €275,000, an increase of €15,000 compared to last year.

David Hall of the Irish Mortgage Holders Organisation said that even though asking price inflation might be slowing, it will still be difficult for buyers.

‘We are going to see a levelling off if not a reduction. Coupled with everything else, the banks are assessing the loans differently as well. They are taking into consideration the expenditure and the rising interest rates.

‘It is going to be much more difficult to get money. You’ll have less people with the fire power required to keep the prices increased and that by default will show deflation.

‘The demand is still massive, but we’ll see a stabilisation,’ he said.

Mr Hall said the average mortgage application takes six months but banks are becoming more cautious about who they lend to. ‘All the margins that are usually used to assess your circumstances prior to a mortgage application, they are all wonky. Nothing is the same as it was six months ago and nothing will be the same in six months’ time,’ he said.

Report author Conall MacCoille, Davy Stockbrokers’ chief economist, said house prices are expected to grow by 6% this year but by just 3% next year, reflecting a slowdown in the property market.

‘Ireland potentially faces an energy crisis this winter amid fears of a full-blown European recession brought on by events in Ukraine and surging natural gas prices.

‘On one hand, new listings for sale are strong, suggesting the market is merely making up for lost time following delayed transactional activity in 2020 and 2021. However, it is most unwelcome to see construction activity curtailed by supply chain issues and rising input costs,’ he said.

‘We are going to see a levelling off’ ‘Pent-up demand remains strong’

Mr MacCoille said the ECB’s decision to increase interest rates will lead to slower price growth but pent-up demand is strong.

‘In July, the average mortgage approval was €288,300 – up 8% on the year. In the year to June, 16% of mortgage approvals failed to translate into a draw down, indicative of frustrated buyers.

‘Similarly, the 30,000 applications to avail of the Help-to-Buy scheme over the past 12 months are well in excess of claims of just 7,400. Plus more than 1,000 applications have been lodged for the Government’s First Home Scheme since it opened in July.’