Cooling trend could be temporary blip – or offer real relief

CITY dwellers hoping to buy a house in 2018 will be mighty relieved with the cooling trend – especially after a year of especially rampant shortage-based property inflation.

Around Dublin and in other cities estate agents are hailing the arrival of new schemes, or at least the promise of new schemes set to open in the new year.

This could be the key factor providing brakes on the price of existing three-bed semis – the staple of the family market nationwide.

Those potential buyers, who have been struggling to maintain their deposit savings amid soaring rents, will now be hoping inflation will remain low.

It could be heading for 6pc per annum, instead of 12pc to 20pc, as we have had over many years since the recovery kicked off.

They will also be hoping that this quarter’s slowdown is not just a temporary blip that might have been caused by a temporary slowdown in mortgage lending – as some suspect it might be.

We’ll have to wait until the first quarter of the new year to find out.

But some early indications are showing up in the year’s final instalment of the Irish Independent/REA average house price index.

Some agents are talking about the long-standing lending restrictions causing affordability ceilings, which are now kicking in and artificially killing off demand for homes.

Rampant property price inflation is bad news for everybody except property investors. Otherwise it increases the amounts of new mortgage repayments and of rents, and therefore sucks vast amounts of spending money out of the active business economy which could otherwise be circulating.

If you didn’t have high rent and mortgage payments, more money would be about to spend in shops, restaurants and with other enterprises.

Where we still have rampant inflation is in our middle and small-sized rural towns, where ridiculously the addition of a dozen new houses might be enough to keep prices in check for a year. In these locations prices are now rising by between 15pc and up to one-third a year.

Sadly they are likely to keep on rising in these locations until the market price of a semi-detached home covers the higher cost of building a new, improved and more expensive version, as demanded by the building regulations that have been introduced since the crash.