Irish house-price inflation surged to more than 8 per cent in May as the market shrugged off the impact of higher borrowing costs.
The latest residential property price index, compiled by the Central Statistics Office (CSO), indicated prices rose at an average rate of 8.2 per cent in the 12 months to May, up from a rate of 7.9 per cent the previous month.
In Dublin, residential values rose at an even higher annual rate of 8.6 per cent, while prices outside Dublin were 7.6 per cent higher compared with a year earlier.
May was the ninth consecutive month to see an increase in headline inflation in the State’s property market, a worrying trend for prospective buyers. With supply pressures remaining and interest rates expected to start coming down, demand appears to be driving prices forward again.
Following a June rate cut, the European Central Bank (ECB) is expected to keep interest rates unchanged at its July meeting in Frankfurt on Thursday. Markets are, however, expecting a further rate reduction in September as inflation continues to ease.
The CSO’s national index of property values for May was 179.4, which is 9.7 per cent above its highest level at the peak of the property boom in April 2007. Dublin prices were still 1.7 per cent lower than their 2007 peak.
The latest data indicates there were 3,997 dwelling purchases by households at market prices filed with Revenue in May. This represented a near 12 per cent increase compared with the 3,572 purchases in April. The total value of transactions filed in May was €1.5 billion.
The CSO said households paid a median price of €335,000 for a home in the 12 months to May.
The Dublin region had the highest median price (€450,000) in the year to May. The highest median prices outside of Dublin were in Wicklow (€445,000) and Kildare (€395,989), while the lowest median price was €169,500 in Longford.
The Institute of Professional Auctioneers and Valuers (Ipav) said prices are likely to have risen further since May, the period covered by the latest CSO figures.
“The shortage of supply continues to push up prices along with the prevalence of buyers not requiring mortgages, and it is also the case that many buyers, particularly in urban areas are on very good salaries,” Ipav chief executive Pat Davitt said.
But it would be wrong to lay blame for continuously rising prices at the door of any of these cohorts of the market, he said.
“Rather the Government needs to ensure more homes are built and the needs of those on average incomes are catered for. They have been the real losers in the equation, and the danger is that if they cannot achieve their ambitions for home ownership they will feel disgruntled and it can make certain careers less appealing. That is not good for society,” he said.
Rachel McGovern from Brokers Ireland highlighted the spike in housing commencements in April linked to the extension of the waiver for development levies.
“These figures would appear to indicate that such incentives work. However, the flip flopping in terms of their introduction merely for a year and then their extension for a further short period just as the deadline was about to close is all too indicative of piecemeal initiatives on housing policy,” Ms McGovern said.
Why are Irish property prices still rising?
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