Rising house prices so hot 'they're scalding' in some urban areas
Published 29/05/2014 | 02:30
PROPERTY prices are now rising so strongly that there is a risk that first-time buyers will end up over-stretched trying to meet mortgage repayments.
Economists said prices were not just overheating in urban areas – they were now so hot they were "scalding".
Prices in Dublin shot up almost 18pc in the past year alone, although they fell in other parts of the country.
The Central Statistics Office (CSO) said prices across the State were up 8.5pc in April, when compared with a year earlier. It was the 11th month in a row of prices rising on an annualised basis.
In April, prices nationally rose 1.4pc, according to the CSO, while prices in Dublin rose by almost double that, at 3.1pc.
Prices are now rising at the fastest pace since June 2007, around the time that prices peaked. When Dublin is excluded, there was a fall of 0.3pc in prices in the month in what the CSO calls the "rest of Ireland". But over the past year, prices were up 1.3pc in places outside the capital.
Despite the latest price surge, valuations are now 46pc lower than they were at the peak of the boom in 2007, the CSO said.
Residential properties are now changing hands for €179,000 nationally, up €15,300 in the past year, according to calculations based on the figures by Goodbody Stockbrokers' Juliet Tennent.
In Dublin, prices have risen by €35,300 in a year to €233,000.
Outside the capital, the average property is transacting for €150,000, up close to €4,000 in a year.
Up to half of those with a residential mortgages are in negative equity, where the size of the mortgage is greater than the value of the property.
Finance Minister Michael Noonan has denied a bubble is developing, as he is anxious to see prices rising to take boom buyers out of negative equity.
Asked for a comment in reaction to the surging prices, the Department of Finance said it was encouraging prices outside of the capital now appeared to have stabilised. It made no reference to surging prices, despite being asked it was worried about an over-heating market in urban areas.
Economist with Davy Stockbrokers Conall MacCoille said the housing market was starved of supply, which was pushing up prices at an unsustainable level, particularly in the capital. "Dublin's housing market is in the process of going from lukewarm to scalding hot," he said.
Tiny numbers of houses were changing hands. He calculated that so few houses were being put up for sale that the average home across the State only changes ownership every 75 years. Prices could rise by even more than 20pc over the next five years in Dublin, according to Davy Stockbrokers. The Construction Industry Federation (CIF), which represents developers, said the housing market in Dublin will be susceptible to large house price jumps until the supply issue is resolved. CIF director general Tom Parlon (inset) said: "These latest statistics should come as no surprise to anyone who has been following the property market. A shortage of supply means the level of demand is not being catered for and this is leading to an increase in prices in Dublin and certain other urban areas."