Soaring prices see the average cost of a house reach €300k

HOUSE prices are rising at their fastest rate in two years, pushing the average home over the €300,000 threshold, official figures show.

In the year to February, property prices rose 3% to €300,278, and the number of sales in February of this year was 3,205, the highest total for that month in at least a decade.

The rise in prices mirrors a recent Daft.ie report that revealed asking prices soared by 8% in the past year.

However, Dublin property prices are over 21% lower than at their peak in February 2007, while prices in the rest of the country are 17.5% below their May 2007 peak, new Central Statistics Office figures show.

The average price in Dublin of €456,547 was the highest in any region or county. Dún Laoghaire-Rathdown had the highest average price in the Dublin region at €605,312, while South Dublin had the lowest at €373,142. Outside Dublin, the Mid-East – counties Kildare, Louth, Meath and Wicklow – was the most expensive region, with an average price of €318,059, and Wicklow was the most expensive county, on €393,585.

The Border region – counties Cavan, Donegal, Leitrim, Monaghan and Sligo – was the least expensive region, with an average price of €150,052. Longford was the least expensive county, with an average price of €126,020.

Experts are blaming the lack of supply of new homes, because of lockdown halting building work, for the fastrising prices, as well as people using money saved during the lockdowns of the past 12 months to boost their bidding power on properties.

Under the Central Bank’s mortgage rules, the amount people can borrow is linked to their income, but this does not stop people topping up an offer on a house with savings.

Personal savings on deposit in banks have reached an historic high of almost €128billion, increasing by €15.7billion or 14% in the 12 months to end of February.

‘This represents the highest annual increase in household deposits since the series began,’ the Central Bank said.

David Duffy, of Property Industry Ireland, said: ‘You’re looking at strong demand, and for people who are actively looking at buying a house, they’ve probably built up significant savings, as the Central Bank data show.

‘In a market where you’ve got strong demand levels, high levels of savings and low supply, we are seeing that now being reflected in the price increases. If you’ve got a higher deposit, it does mean you can either bid a higher price for a particular home you’re interested in or look at a different home. If you have built up a higher deposit than you otherwise would have, that could mean a higher price that you pay, it’s not a given and with all these things it’s more complex.’

KBC bank chief economist Austin Hughes said ‘undoubtedly’ the high level of savings had the potential to add ‘up to 5%, it could be up to 10%’, to people’s buying power.

‘An additional influence is the potential impact of some element of the “forced” savings built up through the past year being channelled into home purchase,’ he added.

‘A wide range of estimates have been produced relating to the scale of “excess” savings overall, but most fall into a €7billion-€10billion region; we tend towards the lower figure.’ He also said responses to a special question in the KBC March consumer survey suggested 10% of consumers ‘envisaged using the additional savings they had built through the past year for a specific purpose such as home purchase or renovation’.

Mr Hughes continued: ‘As CSO data suggest marketbased household purchases transactions amounted to €11.3billion in 2020, the release of “forced” savings might add somewhere between 5% and 10% to purchasing power.

‘These considerations mean in the short term, there is some prospect homebuyer demand will be boosted well above “normal” levels while health-related restrictions cause supply to fall substantially short of such metrics.

‘Curbs on construction through the first quarter mean new housing completions at best will fall modestly short of last year’s 20,700 outturn.

‘This inflated imbalance between pent-up demand and postponed supply seems set to underpin property prices in coming months.’

Average Dublin price is €456k ‘Inflated imbalance’