Property price rises to continue - but at a slower pace
Published 21/04/2015 | 02:30
The rise in house prices will slow this year and next - but there will be no sustained decline, one of the country's leading stockbrokers has said.
Davy forecast home prices will rise by 9.4pc this year, slower than the 12pc increase seen in 2014.
Price growth will moderate to 5.2pc next year and 4.5pc in 2017, according to the report by Davy economist Conall Mac Coille.
Davy said house prices had moderated at the start of the year following the introduction of the new Central Bank mortgage deposit rules.
And house prices remain 37pc below peak level, the brokerage firm said. Yet the level of transactions remains small.
The report said residential property transactions equalled just 2pc of the housing stock last year and mortgage lending equated to just 1pc.
"At current rates, the average property is transacting just once every 50 years. Mortgage lending, at 1pc of the housing stock, is still at its lowest level since records began in 1970," the Davy report noted.
The stockbroking company also said that, although house prices are now at five times the average income, it expects that as the economy recovers further and unemployment falls, wages will rise and so will affordability.
The Central Bank rules will tighten affordability throughout this year, although the full impact of the measures are not expected to become apparent until later in the year.
Davy suggested that many first-time buyers will not be affected. The report noted that in the first half of 2014, two thirds of first-time buyers were below the €220,000 threshold, and would have required only a 10pc deposit. And of the third above the threshold, many had loan to values below the Central Bank's sliding scale.
"This means that only 25pc of first-time-buyers would have been affected," the report said.
It added: "If anything, expectations of squeezed credit availability may have led potential buyers with mortgage approvals to rush transactions in early 2015."