Property prices soar even before €50m Help-To-Buy scheme starts
The rate of property price increases picked up ahead of the introduction of a tax rebate for first-time buyers.
Prices rose nationally by 7.2pc in the year to August, according to the Central Statistics Office. This compares with an increase of 6.7pc in the year to July.
Experts expect prices to keep rising. It comes as the Department of Housing insisted that changes to the Help-To-Buy scheme would not result in any extra cost to the Exchequer.
It has emerged the plan announced on Budget day would have excluded the average first-time buyer unless they borrowed more money than necessary.
Originally, Finance Minister Michael Noonan stipulated a buyer would have to take out a mortgage worth 80pc of the value of the house or more.
However, the Central Bank intervened to point out that the average buyer borrows only 78.7pc. Mr Noonan has now lowered the loan-to-value ratio to 70pc, meaning a larger number of people will be able to qualify for the rebate.
Despite this, a spokesperson for Mr Noonan said the Government still expected to fund the scheme with the €50m announced last week.
"The estimate of the potential cost of the Help-To-Buy scheme took on board a number of assumptions with regard to the number of taxpayers who would qualify, the number of new builds available, house prices and the potential rebate available," he said.
He added that as the scheme was "demand-led" it was "difficult to assess the estimated cost, given that we are unaware of how the market will react in terms of the provision of additional supply".
"The estimated cost of the scheme did not take into account any minimum loan to value requirements," he said.
"As the relief available is based on the total value of the property, the Department does not anticipate any change to the estimated cost of the scheme following the change to the minimum LTV ratio."
Housing Minister Simon Coveney said yesterday he expected up to 6,000 people to avail of the scheme.
But the challenges facing the sector continue to mount, as strong price rises continue despite Central Bank lending restrictions were designed to put a brake on price hikes.
The rise in the month of August was only 1pc, but the annual rise was the sharpest since June 2015.
In Dublin, all residential property prices increased by 4.5pc in the year to August.
The highest house growth was in Dublin City and Fingal, with house prices in both increasing by 5.9pc. In contrast, the lowest growth was in Dun Laoghaire-Rathdown, with house prices rising just 1.5pc.
Outside Dublin, prices shot up by 11.4pc in the year to August. The south-west region showed the greatest price growth, with house prices increasing 14.8pc.
The mid-east region showed the least price growth, with house prices increasing 5pc. The price gains were strongest in areas with the slowest recovery so far. In the midlands, prices fell slightly in the month but were up 14.1pc on the year. In the southwest, prices rose 14.8pc on the year.
Conall Mac Coille, economist with Davy Stockbrokers, said he now expected property price inflation to pick up even more next year due to the Government's new Help-To-Buy rebate scheme. "We will now have to revise up our projections for house price inflation above our current forecast of 5pc in 2017," he wrote in a note for investors.
KBC Bank economist Austin Hughes said he expected prices to keep rising in coming months.
The average market price paid for a property nationwide in August was €257,214.