House prices set to rise 5pc this year, new report finds
Published 11/01/2016 | 08:30
House prices around the country are expected to rise by up to 5pc this year, a new report has found.
The new figures show that last year asking prices jumped nationally by 7.4pc, but in Dublin they climbed by just 2.6pc, with a four-bed house in the capital selling for an average of €399,000.
This is compared to a price tag of €215,000 in Meath, €174,000 in Kilkenny and €80,000 in Longford.
A Davy and myhome.ie report on the final quarter of 2015 shows that house prices in Dublin dipped slightly as inflation slowed and the rest of the country caught up with the escalating prices in the capital.
Despite this dip, the report predicts that, due to continued ongoing recovery and rising incomes, house prices will continue to rise this year.
The author of the report, Conall MacCoille, chief economist at Davy, welcomed the slowdown in price increases, which he said were largely driven by "unsustainable" price increases in the capital.
Mr MacCoille also credited the slowdown in prices to the controversial Central Bank mortgage rules introduced last year, which require buyers to gather a 20pc deposit in order to secure a mortgage.
The rules also require first-time buyers to deposit 10pc on the first €220,000 on a home, and 20pc on any excess value.
"The Central Bank's mortgage-lending rules appear to have prevented home-buyers from taking out ever-higher leveraged mortgage loans, thus limiting the pace of house price inflation," Mr MacCoille said.
"Housing market activity was artificially inflated towards the end of 2013 and 2014 by expiring mortgage interest reliefs, capital gains tax exemptions and a rush of transactions and mortgage approvals ahead of the lending rules.
"In 2015, the usual summer peak for activity reasserted itself, with the result that housing transactions and movements in asking prices in the [fourth quarter] were always likely to be relatively modest," he added.
The economist expects that 2016 will see a continuance of house prices around the country catching up with the capital.
There is still a large gap between prices in Dublin when compared to the rest of the country, however.
"The median asking price for a three-bed semi in Dublin is €275k which is six times the average income of €45,600. In contrast, house price-to-income multiples in many other areas are still in the range of three to four, so, looking forward, there is probably more room for prices to catch up outside Dublin," he said.
Mr MacCoille also said the lack of urban supply "remains acute", which will also play a part in driving up house prices.