Property market paralysis strikes as lending rules and Brexit collide
The last three months of 2018 saw very small price rises, as Central Bank rules frontload activity to the start of the year, writes Mark Keenan
The property market was paralysed in the last quarter of the year as lending rules and Brexit concerns kept prices static.
The values of average homes either rose by tiny increments or stayed still during one of the slowest quarters for house-price inflation nationally since the crash.
The lack of lending-rule exemptions at this time of year has also made the usual season slowdown more apparent.
Around half of all markets surveyed showed no growth at all, according to the Irish Independent/Real Estate Alliance (REA) Average House Price Index published today.
The average semi-detached house nationally now costs €236,287, the Q4 REA Average House Price Survey has found - a rise of 0.6pc on the previous quarter's figure of €234,284.
Overall, the average house price across the country rose by 4.6pc in 2018 - indicating that the market is continuing to steady after an 11.3pc overall rise in 2017.
After rising by 12.5pc in 2017, the average price of a second-hand semi-detached house in the capital has increased by just over €7,000 this year and now stands at €445,167.
In the capital and commuter belt areas, much of the slack at the end of the year was caused by what estate agents now term "Q4 Syndrome".
This is an end-of-year paralysis caused by an artificially created slowdown in mortgage lending, particularly as people tend to wait for the new year and a new chance at exemptions to strict lending rules.
Elsewhere across the country, the usual seasonal slowdown was amplified by "wait and see" attitudes over Brexit.
The index indicates national price growth through the quarter for semi detached homes of just 0.62pc compared to 1.8pc for the same quarter in 2017.
The data demonstrates exactly how the irregularly-timed issuing of lending rule exemptions by banks is distorting the property market in Dublin, Cork and commuter locations.
The phenomenon is frontloading sales activity and price inflation into the first quarter of the year and killing it in the last.
The survey looks at the current sales value of the average Irish property type - the three-bed semi.
It clearly shows property price inflation happening the first part of the year, particularly in Dublin, Cork and commuter areas where average homes are most affected by the Central Bank's strict mortgage lending criteria.
But both north and south County Dublin along with Cork experienced zero price growth in the last quarter, while postcoded Dublin districts saw values rise by just 0.4pc.
This was perhaps to be expected given that cash sales have diminished (from 27pc to 19pc in the year) and loan ceilings for mortgage loans have been reached for average buyers for three-bed semis in most Dublin locations.
Overall the price of a three-bed semi-detached house in Dublin city has increased by just 1.6pc in the last 12 months as the Central Bank's borrowing rules increasingly define affordability in the housing market.
But elsewhere, general uncertainty over Brexit was blamed for flat quarters in more affordable counties which had otherwise experienced high inflation earlier in the year. It is a sign that returning Irish will be putting plans on hold until the Brexit outcome is clear.
Meanwhile, many of those in towns based in farming locations have been concerned over how incomes, employment and therefore values will pan out, depending on the Brexit outcome.
Rural communities reliant on farm incomes will also feel spooked over the heightened antics in Britain.
Overall, agents expect activity to resume somewhat in the new year when exemptions are back on the menu and there is greater clarity on Brexit.
Several counties which saw price growth in the first nine months of the year saw zero growth in the last quarter. The most striking was Laois, which had experienced 18pc price growth in the first three quarters of the year, but saw zero growth in the last quarter. The trend was also evident in Leitrim, Wicklow, Cavan, and Limerick.
Other counties showing zero growth in the final quarter included Wexford, Donegal, Mayo and Westmeath.
Overall, the data shows that the Central Bank's lending regime is definitely succeeding in keeping price inflation under control in more expensive locations.
Recently the property sector appealed to the Central Bank to reassess the way that exemptions are frontloaded and therefore distorting the market on this basis. However ,the Central Bank has refused to alter the regime.
Suggestions that banks are deliberately "stretching out" sales at the end of the year is evidenced by an increase in the average time to sell a home moving up to seven weeks.
One Dublin agent, REA Fitzgerald Chambers in Stoneybatter, reported that average prices dropped by €20,000, or down 5pc, in the final quarter of the year, with average sales times increasing from four to eight weeks.
The Irish Independent REA Average House Price Survey concentrates on the actual sale price of Ireland's typical stock home, the three-bed semi, giving an up-to-date picture of the second-hand property market in towns and cities countrywide to the close of last week.
"Across the board, agents are reporting that the supply of finance to the market has decreased as banks use up their exceptions to the rules in the early part of the year," said REA spokesperson Barry McDonald.
"The second-hand market has become extremely price sensitive across the country and it is the areas with quality housing stock available for under €270,000 that are achieving highest growth. Once again, there is a drop-off in viewings for four-bed housing in certain areas where they are priced over €400,000, illustrating the influence of the Central Bank rules."
Growth in the commuter counties also slowed to 0.38pc in the last three months - an annual rise of 4.18pc - with the average house now selling for €249,472.
This is an annual rise of €10,000 and growth of €2,000 in the last three months.
The biggest urban rise was seen in Galway city, where selling prices rose by 2.7pc in the quarter to €282,500 - a yearly increase of 9.7pc.
"The Galway city market remains buoyant, however it is taking a longer to get sales closed, with average time to sell rising from four to seven weeks in the final quarter," said Kevin Burke of REA McGreal Burke.
"At the higher price points, sales are slower as the number of cash buyers has dropped from 15 to 10pc over the course of the year."
The price of housing in Waterford city, at €210,000, is one of the reasons for its 2.4pc rise in Q4, and 7.7pc annual increase, according to Barry McDonald.
"Our agents REA O'Shea O'Toole report that demand continues to be strong and asking prices are being exceeded by competitive bidding, with properties achieving sale agreed status within four weeks of being put on the market," he said.
Prices have stayed static in Limerick city in Q4, with its average selling price of €200,000 representing a 4.2pc increase throughout 2018.
Local agent REA O'Connor Murphy says that an increase in new developments has stabilised the second-hand residential market there.
Cork has experienced the slowest growth of the four, up 2.4pc annually, with an average price of €317,500, and remaining static in the past three months.
Agents are reporting a limited supply of three-bed semis in mature and popular residential areas.
The highest annual increases (7.7pc) were once again seen in the rest of the country's towns, which rose in selling price by an average of €10,000 in 2018 and which experienced a 0.85pc rise in Q4 to an average of €157,717.
In holiday home areas, such as Killarney and Bantry, buyers over €500,000 are hedging their bets on a rise in sterling if there is no hard Brexit, which could give them a 15pc increase in value.