While house prices are continuing to rise the rate of inflation is slowing due in the main to tighter bank lending according to the latest house price report from MyHome.ie.
Asking prices rose 7.2% in the year to Q2 2018 – the slowest pace of inflation in two years – and down from 9.5% in Q1. In Dublin, asking price inflation has slowed to 6.8%, down from 11% at the turn of the year.
The report, which is published in association with Davy, found that the prices of newly listed properties nationally rose by 3% in Q2 while prices in Dublin rose by 2.2%. Newly listed properties are seen as the most reliable indicator of future price movements.
The median asking price for new sales nationally is €270K while in Dublin it’s €384K.
The author of the report, Conall MacCoille, Chief Economist at Davy, said that the slowdown in house price inflation should be welcomed as double-digit price growth could not be sustained over the long term.
The Celtic Tiger years demonstrated the folly of allowing rising leverage in the mortgage market to drive double-digit house price inflation indefinitely. This time round, the Central Bank's 3.5 X loan-to-income (LTI) threshold is preventing households from chasing prices higher by taking on excessive mortgage debts.
We would normally expect the slowdown in asking prices to feed through into transaction prices within the next three to six months. For now, we are seeing stronger price gains in less expensive areas of Dublin and among the less expensive property types. For example, one-bedroom apartments in Dublin are up 11.4% on the year but four bedroom detached houses are only up 2.3%
Of course, Ireland still faces an acute housing shortage but unlike the past there is a more sensible debate on how to solve the problem. Short-term ineffectual measures from the early 2000s such as allowing increased leverage on mortgage loans, tax breaks or mortgage interest relief have been left by the wayside. Instead the debate has focused on planning reform, housing density and efficient use of state land and infrastructure funds MacCoille concluded.
Angela Keegan, Managing Director of MyHome.ie said the improvement in stock levels, particularly in Dublin was most welcome.
Our data shows that stock levels nationally are up 3.7% on the year to 21,600, the first positive growth since 2015. In Dublin where the housing shortage is most acute, stock has risen by 25% to 5,000 homes which is very positive. With few homes now in negative equity transactions among existing homeowners with mortgage debt are on the rise. There are also now 409 new housing developments listed for sale on MyHome – well up from the 342 in mid-2017
While some thought the lending rules would hold back activity, figures from the Property Price Register show transactions in the first five months of 2018 were up 6% and that the increase for the year may well be closer to 10%, bringing the level of transactions for the year to 60,000. While we are still clearly in the midst of a housing crisis, all the key indicators are moving in the right direction as we inch closer to a normally functioning property market, Keegan said.
