Saturday 21 September 2019

The rise and rise of house prices is slowing at last, say experts

EQUILIBRIUM: John McCartney of Savills
EQUILIBRIUM: John McCartney of Savills

Fran Power

The rise in house prices will slow further next year according to property experts surveyed by the Sunday Independent, while demand for houses may be peaking or already have stabilised.

A housing expert suggests the rate of increase in prices may slow from 8pc nationally this year to 6.2pc nationally and 4.4pc in Dublin for 2019. Predictions for 2020 show a further cooling off of prices to 4.2pc and 3.2pc annually respectively.

The figures come from John McCartney, director of research as Savills, and are backed up by Pat Davitt, CEO of IPAV, who said: "The days of the 10pc and 12pc and 15pc are gone for the moment. I'd say we're looking at price increases under 5pc in Dublin for 2019."

While the slowdown in prices will offer some relief to prospective house-buyers, housing policy analyst Mel Reynolds cautioned: "We're still between 5 and 6pc, which is pretty high by a lot of standards, in comparison to Europe and the UK."

In a clear sign we are moving back to a more balanced market, demand for houses may plateau or have peaked, said McCartney. However, demand still outstrips supply, and will continue to do so for some years to come.

He expects the rise in house price inflation to continue to fall as the market moves to equilibrium in late 2022 or early 2023.

The further slowdown shows the combination of stringent Central Bank mortgage rules, increased supply of new homes and the fact would-be purchasers have reached their upper spending limits have put a brake on prices.

It is possible rising costs will affect the supply of new builds, said McCartney, pointing to a sharp rise in construction wages in the second quarter of this year. "However, construction has remained the fastest-growing sector of employment with 17,000 additional jobs in the year to September. So far, therefore, there is no evidence of an absolute manpower shortage and the rise in construction wages may just be a once-off impact of last October's sectoral employment order."

Currently, a number of exemptions that allow new borrowers to exceed the Central Bank's mortgage rules are available. Up to 20pc of mortgage lending to first-time buyers (FTBs) can be above the 3.5 times loan-to-income limit. Only 10pc of second and subsequent buyers can avail of the exemptions.

A maximum of 5pc of FTBs can breach loan-to-value (LTV) caps of 90pc of the purchase, while 20pc of new lending to second or subsequent buyers can exceed the 80pc LTV ceiling. However, the system of mortgage exemptions has been criticised. "It's unfair to borrowers, it's unfair to banks, and it's impossible to manage," said Michael Dowling, managing director of Dowling Financial.

"Managing the exceptions to the Central Bank rules is very difficult for banks and is very frustrating for prospective borrowers.

"Where borrowers apply themselves for a mortgage, there is evidence they are approved for exceptions with more than one bank. There is no way of controlling this and it is unfair to other borrowers looking for exceptions who are refused because a bank has reached the relevant quota."

The Central Bank is due to publish its annual review of the exemptions on Wednesday.

Sunday Independent

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