€17k slapped on the price of a house within a year

THE average price of a house soared by more than 7% last year – a massive €17,000 increase.

Shockingly, the average price of a house has jumped €148,000 in the last five years, the latest Daft.ie report found.

Last night, a leading property expert said the figures showed the housing market has become ‘dysfunctional’ as demand continues to far exceed growth.

‘The reason that prices are rising is not complicated: the growth in demand far exceeds the growth in supply,’ said Daft.ie spokesman Ronan Lyons, assistant professor in economics at Trinity College Dublin.

‘The fundamental barometer of a healthy housing system is that, where new demand occurs, new supply follows quickly. But a closer look at the figures reveals just how dysfunctional Ireland’s housing system is,’ Mr Lyons said.

And the price rises show no sign of abating, as the latest Daft.ie figures for this year show that they have increased by 2.5% in the first three months of this year.

Nationally, the average asking price for a house is €247,000, a 7.3% increase from this time last year, when the average asking price was €230,000.

In Dublin, the average asking price for the first three months of this year was €368,356, representing an 8.4% increase from this time last year.

The average asking price for a house in Cork city is now €261,494, just a 1.7% increase from last year.

Houses in Galway saw the biggest increase, at 11%.

The average house price in Galway city is €273,466, with €193,703 the average price county-wide.

The average house price in Limerick for the first three months of this year was €180,670, an increase of 3.7%.

Nationally, the average asking price has risen 50.3%– or almost €83,000 – since it reached its lowest point in the third quarter of 2013.

In Dublin, prices reached their lowest point in the second quarter of 2012 and have risen by an average of 67% – or €148,000 – since that time.

Mr Lyons added that with Ireland’s population rising year on year, more property is needed. ‘Ireland’s population is rising by over 50,000 people a year. About two-thirds of that increase – between 30,000 and 35,000 – is down to a natural increase in the population,’ he said. ‘The remainder is net migration. A population increase of 50,000 does not mean the country needs 50,000 new homes a year.

‘At a very basic level, not every individual – and certainly not newborns – has a household by themselves.’

But Mr Lyons raised concerns about the impact a lack of housing will have on household make-up. ‘Simply put, if you can’t find a dwelling, you cannot form a household. Looking at the bigger picture... it is clear that the bulk of new households formed will be one or two persons. This has implications for both how many new dwellings are needed and what type. If Ireland adds 2million people in the coming decades, but they are in households of four persons on average, this is an additional 500,000 dwellings.

‘But if – as is overwhelmingly likely – they are closer to two persons on average, Ireland needs twice as many new homes to cover the same increase in population.’

House prices are now running way above inflation.

‘In a healthy housing system, housing prices increase at the same rate as prices in the rest of the economy, no faster,’ Mr Lyons said.

He added: ‘Leaving the housing market aside, consumer prices in Ireland have fallen over the past five years.’

The purchase price of housing in the past five years, though, has risen by one half, on average, according to Mr Lyons. In Dublin, the increase is slightly above 60%, while outside urban areas the increase is closer to 40%.

Price rises show no sign of abating ‘You can’t form a household’

GETTING a foot on the property ladder used to be a realistic ambition for the vast majority of people with jobs.

Everybody knew the rules. You worked hard, put aside as much money as you could and, once you’d scrimped and saved enough, took out a mortgage on a starter home. If all went according to plan, there was the very real prospect of trading up to a bigger property within a few years.

However, the situation has now changed completely. Soaring rents make it more difficult for aspiring homeowners to scrape together enough for a deposit.

If they manage to raise a sufficient sum, stricter Central Bank regulations on borrowing mean there is no guarantee of securing a mortgage. Even those who do get loan approval face fierce competition in what is very much a sellers’ market.

Latest figures show that house prices have risen by 7.3% across the country in the past 12 months. Research also indicates that the average cost of a home in Dublin is now €145,000 higher than was the case five years ago. Of course, it is not so long since that amount on its own would have been enough to buy a very handsome home in many parts of the country.

It also goes without saying that there is nothing intrinsically wrong with a rise in house prices. Apart from anything else, these increases help struggling homeowners to get out of the negative equity trap.

But the problem here is that there appears to be no coherent plan to prevent another property bubble from developing. It is all very well for Government ministers to point to the improving economy, but that will ultimately mean nothing if we end up repeating the events of a decade ago.

Though there are other strands to the housing crisis, they are all connected at the end of the day. Last week it emerged that there are almost 10,000 people in emergency accommodation, of whom more than 3,700 children.

Granted, there can be many reasons why families end up living in guesthouses, B&Bs or other unsuitable dwellings. But one of the key factors is a shortage of available homes. And that is essentially the same reason why house prices are increasing at an exponential rate.

Accordingly, the Government needs to come up with an action plan. The alternative is the market continuing to overheat and, as a consequence, a crash of the sort that drove the country to the brink of economic ruin.