House prices shoot up €26k in space of a year

Massive increase comes as buyers see inflation falling

HOUSE prices across the country are continuing to increase, and are up by €26,000 on average in the space of a year.

The average sale price now is €391,000, up from €365,000 a year ago – a rise of more than €2,100 a month.

Prices nationally in January, the latest official figures available, are up 5.4%, the sharpest rise for a year.

The acceleration could be a sign of confidence among buyers that interest rates will start to recede, according to housing campaigner David Hall, of the Irish Mortgage Holders Organisation. He believes prices are starting to take off as home buyers see inflation falling.

Higher interest rates mean increased mortgage repayments, which cools house-buying demand, while falling rates have the opposite effect.

Mr Hall said: ‘There is obviously preparation now for the market readjusting back again. When interest rates went up, prices didn’t drop massively, there was a slight dip.

‘The market’s correcting itself and now we’re getting ready for the “normal” to return, which is up, up, up.’

However, he does not believe interest rates will return to the abnormally low levels where the base rate was at 0% from 2016 until July 2022 in the wake of the financial crisis.

‘They will normalise, but they’re still higher than during the Celtic Tiger times,’ he said. ‘There’s a bit of gambling going on, everyone’s gambling on interest rates going down. They’re gambling on the home market getting more supply and also gambling on the cost of living staying down.’

He predicts interest rates will ‘hopefully’ settle at 2%, down from the current 4.5%.

Mr Hall said: ‘Everyone is hoping that between now and September there might be a 0.5point reduction, maybe a 0.25 reduction in June and a further 0.25 reduction in September.

‘The markets are hoping for a 0.5-point reduction this year and it really depends on how Germany is looking again when it gets to June.

‘Things are on the right course, according to [European Central Bank president] Christine Lagarde. But again, there’s no decisions made yet and things can change.’

However, Brokers Ireland said the continuing house price rise ‘is against the trend of normalisation’ and speaks to how dysfunctional the market remains.

Its financial services director, Rachel McGovern, said: ‘Home ownership is increasingly becoming the preserve of those with resources, be that arising from high-end salaries, those with cash resources or financial support from family. Policymakers have to find better answers more quickly to the affordability challenge, which is impacting both purchasing and rental. Among those measures should be transitioning excess commercial properties to rental and accepting the State take on housing is simply too large, and through VAT and a host of other taxes and levies is actually counterproductive, compelling buyers, especially those who have to finance buying through borrowing, to pay interest rates on those borrowings for the lifetime of a mortgage.’

In the year to January, house prices in Dublin rose by 4.7% while apartment prices went up by 3.9%. The highest house price growth in Dublin was in Dublin city at 6.2%, while Dún Laoghaire-Rathdown in the southside saw a rise of 2.6%, according to the Central Statistics Office (CSO).

The fastest price growth was in the Mid-West – counties Clare, Limerick and Tipperary – at 9.5%. The slowest growth was in the border counties of Cavan, Donegal, Leitrim, Monaghan and Sligo at 2.4%. christian.mccashin@dailymail.ie

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