Wednesday 21 November 2018

House price inflation slows in Ireland's cities after heated year

Prices are still rising, but at a much lower rate

Real estate agent with house model and keys Photo: Deposit
Real estate agent with house model and keys Photo: Deposit
Mark Keenan

Mark Keenan

THE rate of property price inflation in cities slowed radically at the end of the year, offering fresh hope for those seeking to buy a home.

Dublin price increases were running at 1.5pc for the last quarter of 2017, compared with 4.1pc in the third quarter.

In Cork, Limerick, Waterford and Galway cities, the price of average semi-detached homes rose by just 1pc in the final quarter, rising by €2,375 to €238,625.

However, prices are still rising – if these rates of inflation carried through the new year, they would amount to annual price increases of 6pc in Dublin and 4pc in the other cities.

The inflation slow-down comes at the end of a very heated year, during which the prices of semis in many counties surged by more than 15pc, with some experiencing rises of 20pc or higher.

A semi in the capital added 12.5pc overall in 2017 and now costs €438,000, while semis in the other regional cities averaged a more affordable €238,625.

Elsewhere, 10 markets saw prices increase by 15pc or more against a year ago, and three saw the price of the semi shoot up more than 20pc.

The most inflated market nationally was to be found in Cavan town, where three-bed semis appreciated in value by a massive 33pc, or one-third, according to local agent REA Peter Donohoe.

Three-bed semis in the town came from a low base of €105,000 a year ago to €140,000 today.

Estate agents credited the city slowdown in the last quarter on a combination of factors – including the increasing availability of new homes and on aspiring buyers hitting affordability thresholds based on lending limits.

Some participating agents mentioned a “fatigue” factor associated with difficulties in acquiring second-hand  properties.

Others mentioned the possible influence of banks, which had front-loaded their quotas of exemptions to normal lending rules, therefore leaving less possibility to borrow in the final quarter.

Whether or not front-loaded exemptions were a factor will not be apparent until mortgage lending data for the entire year is published.

“With housing commencements expected to reach 15,000 this year for the first time since 2008, we are seeing real progress in the delivery of new home developments,” said Paul Grimes, of REA Grimes, which operates in Dublin city centre, Skerries and Ashbourne.

“We are entering a less heated phase in the second-hand market because many buyers are now opting to put deposits on new homes that may not be completed until mid-2018. This, in turn, will play a part in freeing up the stock of second hand housing on the market.”

The REA average house price survey concentrates on the current sale price of Ireland’s typical stock home, the three-bed semi.

It gives an up-to-date picture of the property market in towns and cities countrywide to the close of last week.

The average semi-detached house nationally now costs €225,806, the Q4 REA average house price survey found.

Overall, the average house price across the country rose by 11.3pc over the past 12 months – compared with 7.7pc nationally in 2016.

“The heated market that we saw throughout much of 2017 has cooled somewhat and we are now in a period of more certainty,” said REA spokesperson Healy Hynes.

“A lack of supply is still the main driver of the market, with listings of second-hand properties at a low level around the country. Anything that does go up is reaching sale agreed in a short period of time – five weeks on average and four weeks in Dublin city. This is not normal in a properly functioning market, where time periods of eight weeks to sale agreed are more common.”

The commuter counties also returned a restricted growth of 1.5pc in the final quarter of the year.

But these counties rose about 10pc for the year, following a relatively static 2016, with the average house now selling for €229,300.

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