HOUSE PRICES NOW SOARING AT TWICE LAST YEAR’S RATE

Home values have already risen by more than they did in all of 2016

HOUSE prices have risen more in the first six months of this year than in all of last year, a new report has revealed.

The national average price in June was 8.8% higher than in December. By comparison, the cost of a home rose by 8% for the whole of 2016 – and 8.5% in 2015.

The dramatic figures have been released in the latest House Price report by Daft.ie, which predicts prices will continue to rise rapidly – although it says there is no property bubble.

‘If the first half of 2017 is anything to go by, price increases are likely to match or exceed those in 2014, when they rose by 14%,’ said the author of the new report,

Ronan Lyons. ‘That year, it was Dublin that drove those trends, with prices [in the capital] rising by 21% during 2014, compared to 9% elsewhere in the country.

‘And it seems as though the same pattern is re-emerging in the 2017 market. The annual inflation in the Dublin market exceeds the rate elsewhere in the country for the first time since early 2015.’

In fact, houses prices are rising so fast they are ‘earning’ almost as much as the average worker. The average price has gone up by more than €2,000 a month in the past year, according to the report released yesterday.

At the same time, official figures on wages and earnings, released by the CSO yesterday, reveal the average wage was up by just 1.1% over the past year to almost €37,000.

That means average workers are earning just above €3,000 a month. However, houses are up €25,000, or almost 12%, over the past year to a national average of €240,000.

The ‘average house’ is €75,000 higher than its lowest point in the autumn of 2013, after the crash of 2007.

The Central Bank’s borrowing rules – introduced in February 2015 – tied the amount someone can borrow on a mortgage to 3.5 times their annual wages and 90% of the cost of the property for first time buyers. This drops to 80% for everyone else.

It should mean price hikes are linked to salary rises if there are enough homes on the market to meet demand.

‘If the Central Bank rules weren’t in place then we would have much higher inflation. There wouldn’t have been any slowdown in Dublin in 2015/16 and we’d be looking at another bubble I think,’ said Mr Lyons, who is assistant economics professor at Trinity College.

He said the market is not in a ‘bubble’ state because the new rules have ensured they are linked to incomes.

‘They [the rules] were designed to anchor housing prices to the real economy, in other words to reflect supply and demand, especially household incomes.’

He said before the rules were mooted, there was nothing to stop another credit-fuelled bubble from happening.’

The Daft.ie report found that property inflation in Dublin is over 12% and now exceeds the rate in the rest of the country, which is just above 11% for the first time since early 2015. In Galway, Limerick and Waterford, the annual change in prices is even higher and is closer to 15%, while in Cork city, the rate is 9.2%.

Elsewhere, the average rate was 11.2%, but this varied from 7.8% in Connacht-Ulster, to 13.4% in Leinster outside Dublin.

The number of properties being listed is also continuing to rise as more people decide to sell as they see more places to buy. More than 6,000 properties were put up for sale in May, the highest monthly total since the middle of 2008.

Nonetheless, due to strong demand, the total number sitting on the market remains low, at just 22,400 on June 1.

While this is higher than three months earlier, it is 11% lower than on the same date in 2016 and roughly two-thirds below the 2008 peak, the report said.

‘After two years where Central Bank rules had capped house price growth in the capital, the relaxation of those rules has helped drive prices further up,’ said Mr Lyons.

‘Whereas non-urban markets had driven house price growth in 2015 and 2016, Dublin again is seeing increases that are above the national average.’

The country still needs ‘at least 40,000’ homes of all types every year, he said.

Market ‘not near property bubble’