Property prices ‘to keep falling this year’ after CSO figures show decline for three months in a row

The property market is slowing down as mortgage rate hikes impact affordability. Photo: Getty

Charlie Weston

Property prices are expected to keep falling this year after the latest figures showed values were down for the third month in a row in March.

The property market is slowing down as mortgage rate hikes affect affordability for buyers.

Prices were down by 0.6pc in March, according to the Central Statistics Office (CSO).

They have now decreased by 2.6pc over the past three months.

Conall MacCoille, economist with Davy Stockbrokers, said the falling prices reflected the fact that they had risen so much in the past few years such that valuations were now stretched, especially in Dublin.

He said asking prices had been falling for the past nine months, which was now being reflected in the sales prices reported by the CSO.

“A correction is under way and we will see further price falls in the year ahead,” Mr MacCoille said.

He said demand for homes was still strong, and first-time buyers could now borrow four times their income.

But higher mortgage rates were a major factor affecting prices.

CSO figures show prices fell by 0.5pc in January, 0.3pc in February and 0.6pc in March.

Dublin prices fell for the sixth consecutive month and are now 3.2pc down on the September peak.

In the rest of the country, prices have fallen every month so far this year.

In the year to March, prices were up nationally by 3.9pc, a much slower rate of increase than in previous months. A year ago, they were rising at a rate of 15pc.

Prices in Dublin rose by 1.7pc in the past year, and prices outside Dublin were up by 5.7pc.

Mr MacCoille said the most recent figures from the banks showed people were having to borrow more to secure homes.

This was different to the situation in the UK, and would act to keep pressure on prices.

Independent economist Austin Hughes said a further softening of prices was likely, due to cost-of-living pressures and higher lending rates. This is despite strong demand.

Dermot O’Leary, economist with Goodbody Stockbrokers, said the prices of new homes continued to rise while those of second-hand homes were falling.

“There are different dynamics at play in the two sub-markets,” he said.

“In the new homes market, construction costs have continued to rise over the past 12 months, while demand for new homes is bolstered by a range of government initiatives for first-time buyers.

“The weakness in the second-hand market is being led by higher-priced areas in Dublin. These tend to be more volatile,” Mr O’Leary said.

European Central Bank (ECB) interest rates have gone up seven times since last summer, with the latest one this month.

Another two 0.25 percentage point rises are expected before the end of the summer.

This is hitting what first-time buyers can afford.

Meanwhile, purchase activity is also being buoyed by the State’s First Home and Help-to-Buy schemes.

Viacheslav Voronovich, a statistician in the CSO prices division, said: “Residential property prices rose by 3.9pc in the 12 months to March 2023, down from 5.1pc in the year to February 2023, and from the high values of 15.1pc in the 12 months to February and March 2022.”

He said the region outside Dublin that had the largest rise in house prices was the Border area of Cavan, Donegal, Leitrim, Monaghan and Sligo, at 8.4pc, while at the other end of the scale, the mid-west area of Clare, Limerick, Tipperary, saw a 2.8pc rise.

Households paid a median, or mid-point, price of €310,000 for a residential property in the year to March.

Miceál Sammon, who heads up Kildare-based developer Quantum Group IE Kildare which has more than 300 homes under construction, said the latest figures show prices were reaching a point of stability. He said this was beneficial for prospective buyers, developers, and current homeowners alike.

“A more stable market will enable increased construction of new homes, as the Government, planners and developers can collaborate more effectively in a steadier environment,” he said

He said the shared equity scheme, First Home, and the Help-to-Buy Scheme were integral to promoting activity in the market.