For the first time since 2006 property prices increased in Dublin last year. The price rises occurred in the second half of 2012 and exceeded the first two quarters' price falls by 2.2pc as measured by the DNG House Price Gauge. Yet property prices remain over 60pc lower than their peak and in my opinion have now over-corrected.
An article published by two Central Bank of Ireland economists last year stated that they believe that property prices have over-corrected and the ESRI also commented that they consider that house prices could rise significantly when the market recovers.
The availability of mortgages is still a major issue with the two pillar banks namely AIB Bank and Bank of Ireland being the main providers of mortgages.
Other financial institutions have announced that they intend to increase support to the mortgage market in 2013, which will be critical for continued recovery. Also, full recovery will not occur until lenders make mortgages readily available to the important residential investment sector. Cash transactions currently account for in the order of one-third of all sales through our agency.
The rate of house building in Ireland has all but stalled with only 7,662 new homes completed in the first 11 months of 2012 (estimated full year of 8,400) of which over 60pc of these were for the construction of one-off houses. The ESRI has estimated that between 15,000-20,000 new households will be created each year over the coming decade and that this is likely to put upward pressure on property prices.
The number of residential transactions in the state last year increased by approximately 27pc in Dublin and in the region of 16pc nationally compared to 2011.
Notwithstanding these positive results the number of overall transactions remains artificially low. On a per household comparison to the UK, the level of transactions in Ireland would need to triple to equal UK house sale volumes. It is our estimation that the level of transactions in Ireland are likely to double over the next five years.
In spite of the many challenges ahead, I believe that the residential market in the capital is in the early stages of recovery and that property prices could rise by between 5pc-10pc this year. There is also likely to be some growth in other urban areas outside the capital such as Galway and Cork. However, there will be other locations where property prices will be slower to recover and in some instances some locations will require further price re-positioning.
On the whole, I believe that the market has turned a corner and the outlook is positive.
Keith Lowe is chief executive Douglas Newman Good