Will 'accidental gentrification' force low-income families to move outside the M50?
Published 04/07/2016 | 02:30
This latest Daft.ie House Price Report shows some signs of health in the market, amid the broader problem of a chronic lack of supply. The first sign of slightly better health is that the total number of properties actively on the market at any one time has risen compared to three months previously (June compared to March). This is only the second time in five years that this was the case.
The second measure of slightly improved conditions comes from a comparison of the asking and sale prices.
Where list prices are well above the ultimate transaction prices, this clearly points to a falling market. During 2014, however, transaction prices in Dublin were typically more than 5pc above the initial listed price, highlighting the opposite problem: a market where buyers have too little choice and push up prices.
Currently, though, across the country as a whole, there is only a 1.5pc gap. This represents the closest to healthy the market has been since the start of the decade.
The third indicator of greater health is another quarter where Dublin house prices show very muted growth. In a healthy market, house prices will increase at roughly the same rate as general inflation.
In Ireland over the past decade, general inflation has effectively been close to zero, but house prices fell first by 55pc, before rising by more than 40pc in Dublin.
Thus, policymakers and others will welcome the fourth consecutive quarter where the annual change in Dublin prices is less than 3pc.
Indeed, the rate of inflation in Dublin house price now is just 1.1pc, the lowest since prices started to rise nearly four years ago.
It is no coincidence that it fell from 25pc to just 1pc at the time the Central Bank brought in its macroprudential measures.
However, while the primary effect of these rules has been to anchor house prices to real incomes - very much a move in the right direction - there have been secondary effects also.
Perhaps the main one has been to reshuffle demand from high-cost locations - typically with amenities such as being near good secondary schools or the coastline - to lower-cost locations that still meet the basic criteria of access to work.
While much of this effect has been to push buyers out of Dublin into its commuter counties, there have been important effects within Dublin also.
What is clear is the different trend emerging between the cheapest and dearest areas. The strongest price growth is currently in previously unfashionable postcodes - the market's judgment, not mine!
The link between incomes and house prices has forced people to reconsider some of their implicit assumptions about where to look when buying a home - leading to what might be termed 'accidental gentrification'.
This will undoubtedly have some positive effects, not least if affluent Dubliners become more familiar with the city they live in and some of their purchasing power refreshes some suburbs.
But there are clear risks also, notably that lower-income households become priced out of the entire city within the M50.
When it comes to housing, the Central Bank's only real responsibility is the financial stability of the system as a whole. It has no remit to increase supply.
But without the rest of the policy system responding - through, for example, relaxing land use restrictions and lowering construction costs - the Central Bank rules could combine with prohibitive site and construction costs to make Dublin into an enclave for the rich.