Fran Power: 'With such demand, house prices prices have nowhere to go but up'
The rising cost of buying a home seems to be unstoppable, with Dublin prices up by 74pc since 2013. Lack of house building is at the root of this, writes Fran Power
The cost of an average family home in Dublin is now more than double that of a similar three-bed outside the city, according to a new property survey published exclusively in the Sunday Independent today. The average three-bed semi was found to be €517,894, while the national average was €253,466.
The country's highest priced three- and four-bed semis were recorded in Dublin 4, while Dublin 2 topped the scale for two-bed apartments.
The best value for money was to be found in Longford, where values for two-bed apartments were almost eight times lower than those in Dublin 2.
The findings are contained in the IPAV Residential Property Price Barometer, the first nationwide survey of house prices compiled by IPAV, the Institute of Professional Auctioneers and Valuers. The figures are drawn from actual sales of two-bed apartments, three-bed semis and four-bed semis achieved by estate agents nationwide over the period January to June this year and give a snapshot of the current dysfunctional state of the property market.
They confirm recent CSO figures which show that, since their lowest point in early 2013, prices in Dublin have increased by 73.8pc, while those in the rest of the country have risen by just 50.4pc.
A recent Daft.ie report for the period January to June showed that inflation in Dublin (12.3pc) now exceeds the rate in the rest of the country (11.3pc) for the first time in two years.
Pat Davitt, CEO of IPAV, says: "The Dublin market is on its way to reaching, or even topping, the high levels last seen in 2007. This could happen within the next year, and earlier in the more sought-after locations.
"With so little stock availability and unprecedented and soaring demand, prices have nowhere to go but up," Davitt says.
Estimates of how many new houses need to be built each year differ. Davy chief economist Conall MacCoille places it at 30,000 units a year, while Tom Parlon of the Construction Industry Federation puts it at 35,000.
Current estimates put the number of new houses to be completed this year at just 18,000.
"It's clear we're building far too few new houses where they are needed," says Davitt, "which can and will lead to further price inflation.
"No matter what Government interference takes place, the result will be the same unless and until we tackle the root cause of the problem - a lack of house building."
Dublin's hot spots
The three most expensive locations in the country come as little surprise - when prices across all three unit types are averaged, Dublin 4 tops the scale with an average house price of €883,300. Dublin 2 comes in next at €605,556, followed by Dublin 6 at €601,667. The fourth priciest area, Dublin 14 - which includes Dundrum and Goatstown, both areas showing a renewal in interest - comes in at an average price of €508,889.
If price per square metre for three-bed semis is used to rate Dublin values then while Dublin 4 still tops the bill at €5,838, Dublin 3 comes in next at €5,357, followed by Dublin 14, at €5,063, and Dublin 7 at €5,000. Dublin 7 includes Stoneybatter, Phibsborough, and the newly popular Grangegorman, and was once seen as starter home territory but no longer offers the same bargains.
Interestingly, the average two-bed apartment in Dublin 2 out-priced those of Dublin 4, at €383,334 compared to €375,000. These prices compare with the average price paid nationally for a two-bed apartment of €156,808.
Best value in Dublin
Of the 11 Dublin postal codes recorded in the survey, Dublin 9 and Dublin 15 come in as the most affordable for those in search of a two-bed apartment with an average price of €206,308, and €222,000 respectively.
First-time buyers on the hunt for a three-bed Dublin home - however scarce that might be - would be advised to look at Dublin 1 and Dublin 9 where prices are €316,667 and €369,167, as well as further afield in North Co Dublin where areas like Swords offer good value, and prices clock in at €358,000, well below the Dublin average of €517,894. In terms of price per square metre, however, Dublin 1 is again cheapest, followed by Dublin 15 and Dublin 9.
For trader-uppers looking to move up the ladder into a four-bed home, the picture is slightly different. The cheapest homes are to be found in Dublin 15, which includes Blanchardstown, fast-growing Castleknock and Clonsilla, where a number of new homes schemes recently launched, at an average of €406,250.
Rise of the commuter belt
The pressure of rising Dublin prices is forcing would-be buyers in search of affordable homes out to commuter belt zones in Wicklow, Kildare, Meath and, to a lesser extent, Louth and Carlow. The survey shows that prices in these areas are markedly higher than the rest of the regions. A Wicklow three-bed, for example, will cost you more than anywhere else outside Dublin at €275,591, well above the national average of €253,466. Price per square metre is also higher in Wicklow than anywhere outside Dublin at €2,659.
Other commuter zones are more affordable. Prices for three-bed semis in Kildare, for example, where Newbridge, Maynooth, Naas and Kilcock are popular satellite towns, averaged out at €235,000, well below the national average. In Meath, the average price was recorded at €239,000, while the best value for the same type of house was to be found in Louth at €186,667.
Meanwhile, the survey shows it pays to look at the floor area for each area. While the price of a three-bed in Meath, for example, is higher than that of neighbouring Kildare, by just €4,000, prices for floor area seem to suggest that buyers are likely to get more space for their money, as the price per square metre in Kildare is almost 23pc higher than that of Meath.
Dublin v regional cities
The pressure on prices isn't limited to Dublin and its commuter belt. Regional cities Cork and Galway show higher prices too. The cost of an average two-bed unit in Cork city, at €193,334, for example, is almost 68pc more expensive than in the surrounding county, at €114,889, while Galway city records prices for three-bed semis of €232,500 against €211,667 in the county - and even higher disparities for four-beds at €280,000 as against €241,667.
These higher prices may be incentivising developers to begin commencements as a number of new housing schemes are currently underway in Galway, says Pat Davitt.
There is some consolation in terms of value for money for buyers of two-bed apartments in Galway city where price per square metre comes in at €1,950 as against €1,959 for those in the county.
Second hand cheaper than new
The figures also show that there is little incentive for builders to turn the sod in the many counties where second-hand homes are selling for prices well below the average €240,000-€250,000 price tag of a new build.
Traditionally, maintains Davitt, new homes sold for somewhere around 10pc more than second hand houses. "That's gone out the window in an awful lot of towns. If you look at prices per square metre for second-hand houses and you look at prices per square metre as quoted by builders for new housing, you will immediately see the difference in where you are. It's a difference of €60,000, €70,000 or €80,000 and in some counties it's well over €100,000… When we'll ever see new houses in country towns is anybody's guess."