City housing bubble feared as prices soar by €3,000 a month
Shortage of family homes fuels 10pc hike in Dublin
STRONG demand for family homes is causing the Dublin property market to overheat, economists have warned.
They were responding to new figures showing the value of homes and apartments jumped by 10.6pc in the past year.
The surge in the capital in August was the strongest rise since the housing market collapsed.
Prices in the Dublin area have risen every month this year, new figures from the Central Statistics Office (CSO) show.
Dublin valuations are now going up by around €3,000 a month.
Average prices on the east coast are now €213,000, calculations based on the CSO data show.
In the month of August alone, prices in the greater Dublin area were up 2.1pc – the eighth month in a row of increases.
However, the official figures show that by comparison, the national recovery of the property market has been modest.
The CSO said that prices nationally were up on average almost 1pc in August, and close to 3pc in the year to last month.
The residential property index now puts the market at about half as valuable as it was in early 2007.
But economist with Goodbody Stockbrokers Dermot O'Leary warned that property prices in Dublin were overheating.
Limited supply of family homes, strong demand from investors and the fact that most buyers have cash, and are snapping up homes and apartments without the need for a mortgage, is forcing prices to rise sharply in the capital.
Mr O'Leary said: "The market is a bit too hot in Dublin and it will continue like that until a greater supply of property comes on to the market."
Unless more homes are built, the only way there will be more supply is if banks repossess and sell homes and investment properties that are in arrears, he said.
However, the CSO figures show that house and apartment prices are 53pc lower than the peak level reached in February 2007.
Prices outside the capital rose slightly in August, but were down 2.6pc in August compared with a year ago.
The average price nationally is now €171,000, just under half of the level reached at the peak of the housing boom in 2007. Economist with Davy Stockbrokers Conall Mac Coille said the fact that six out of 10 property buyers were cash purchasers was putting a flood on prices.
But this was not sustainable over the longer term, he said.
"The bigger picture is that both house prices and market transactions are slowly recovering, albeit from a very low base," Mr Mac Coille said.
Merrion Stockbrokers economist Alan McQauid said the housing market had now recovered.
"The recent signs of general improvement in the labour market and on the jobs front should help sustain the housing market recovery, especially in Dublin, but it may take some time for the rest of the country to pick up," he said.