| 12.9°C Dublin

'Don't get too excited over house price rise'

HOUSE-BUYERS have been warned about a knee-jerk reaction to the first rise in property prices in five years. The cost of houses in Dublin increased by 0.2pc and by 0.1pc in the rest of the country, figures from the CSO outlined.

Prices in the capital were up for the third month in a row, boosting hopes that the market was returning to a positive level.

However, economists have warned that it takes more than monthly figures to indicate a bounce back and that it could take at least six months before we have a clearer view of the situation.

Experts have pointed out that there is an oversupply and underdemand for property which will prevent a mass buy up. Unemployment remains worryingly high in Ireland and banks are reluctant to shell out mortgages.

Prices in general have plummeted to a massive 50pc lower than its highest level in 2007 and there are certainly perceived bargains in property sales.

But although latent demand may exist in some sections of the market, investment and prices are likely to remain weak nationally given fragile confidence and uncertainty about economic prospects.

Conall Mac Coille, chief economist with Davy Stockbrokers, said that buyers with funds available should be cautious.

He said that the CSO house price index was "based on few transactions and, crucially, excludes distressed cash purchases, which now account for around 30pc of the market".

He said it was too early to see the prices as a sign of housing market recovery.

The ESRI and the Central Bank have both recently suggested that the housing market was nearing the bottom.

Alan McQuaid, of Merrion Stockbrokers, said that there were indications of "pent-up demand" among under 35-year-olds looking to buy a family home. "These figures would appear to back that up," he said.

However, he also underlined the fact that there is a "huge oversupply" in many parts of the country outside Dublin which will continue to weigh on overall prices for some time.

"It is difficult to see people rushing out to buy a house when labour market conditions remain very fragile," he said. "The jobless rate is now close to 15pc, and appears to be going in the wrong direction. We don't see a major improvement in the housing market until there is clear evidence that the jobless rate has peaked and is on a downward trend."