What a difference a year can make. This time 12 months ago, a much publicised lack of supply was causing house-buyers a headache and leading to significant price growth.

Then the Central Bank’s new mortgage lending restrictions were tabled. Since that happened, supply in the much sought-after family home market in the capital has rebounded, with figures from MyHome.ie showing that supply in Dublin is now at a three-year high.

There were more than 5,000 properties listed for sale in Dublin in September 2015, up by 45 per cent on the same month in 2014.

“It’s fair to say that people have noticed an increase in large family homes in prime areas coming on the market,” says Dublin agent Owen Reilly, noting that it’s being driven by people trading down. “Values have recovered sufficiently for people to go ahead.” He says this is happening now as people had put off the decision to move for seven or eight years.

Reilly says he first started talking to one couple about trading down when they were in their mid-60s. Now they’re in their early 70s. “At some stage they have to move on.”

Softening in prices

In Stillorgan, south Dublin, Brian Dempsey of estate agent DNG has also noticed a surge in supply driven by those trading down.

“A lot more came to market late last year,” he says. He believes some vendors had been taking a wait-and-see approach, “but when they saw prices stop going up they felt there was nothing really left to wait for”.

Basic economics would suggest this recovery in supply is feeding through to a softening in prices. According to the Central Statistics Office, price growth has moderated significantly, with Dublin house prices largely flat in the third quarter and down by just 0.1 per cent in the three months to the end of September.

The evidence can also be seen in property listings. In April for example, a four-bed detached house in Mount Argus Way, Harold’s Cross, Dublin 6W came on the market at €520,000; it’s still for sale, but at a slightly reduced price of €495,000.

In Rathfarnham, also in south Dublin, a four-bedroom house in Stonepark Abbey sold in January of this year for €610,000. Now a similar property – albeit with a more dated interior – has just had its asking price reduced by 5 per cent and is on sale at €550,000.

Of course, the previous surge in prices has pushed a lot of potential bidders out of the market.

In May 2014, Dempsey appeared in the RTÉ programme Desperate House Buys, which aimed to portray the mini bubble which had emerged in the market. But, he says, the market had already begun to slow by the time it was broadcast. Now the days of queues of potential buyers viewing houses and getting into bidding wars have dissipated.

With the recovery stalling, vendors have had to adjust to new realities.

“It was tough for a while . . . everyone was expecting another €50,000 on a €500,000 house, so it took a little while [for vendors] to realise that that €50,000 isn’t there,” says Dempsey.

But Dempsey believes this adjustment means “it’s probably the most normal market I’ve seen in a long time. It’s hard to buy and it’s hard to sell.”

Hefty prices

Reilly agrees that the balance of power has again shifted.

“It’s fair to say that some vendors will have to listen to offers,” he says. However, he also says “some don’t have to sell and won’t listen”.

This could be a reason for some of the hefty asking prices putative home-buyers are still coming up against.

With supply up significantly, “everything is taking a bit longer to sell”, says Reilly.

He also says pricing has become very important. “Anyone testing the market will struggle.”

Dempsey agrees. “If the price is right, it’s gone and gone quite quickly,” he says. “If you don’t have that little bit extra to show, it’s difficult.”

But it’s not just the recovery which has priced some would-be buyers out of the market. The impact of the Central Bank’s new lending restrictions have also started to hit home.

In Dublin for example, someone earning €50,000 will only be able to borrow €175,000 under the new 3½ times income multiple rules.

The only way to get around this is to get an exception to rules, which banks are allowed to grant to a certain proportion of customers.

However, Rachel Doyle, chief operations officer with PIBA, says the word from mortgage brokers is that many banks have already closed the door on granting exemptions this year.

“A number of lending institutions have already reached the maximum [exceptions] for the amount of lending they’re proposing to do for rest of the year,” she says.

This means the advice brokers will give homeowners who are considering buying but need a bit of leeway in terms of how much they can borrow is to sit tight and apply again in January, when the banks may be looser with exemptions.

“It isn’t the ideal situation for people who are looking to buy at the moment,” she says, adding that she expects lending figures to fall over the last quarter of the year as a result of this.

While there had been speculation that banks would account for exceptions on a quarterly basis, the Central Bank says compliance is measured on an annual basis.

In theory, one could expect these market factors to lead to a further softening in prices to year-end as the number of buyers who can afford certain properties shrinks until the banks are able to grant exemptions again.

However, that would be to forget that about one in every two buyers is still buying with cash. For these buyers, mortgage limits have no impact, so from now until the end of the year may be an opportune time for them to buy.

“Those people are happy to sit back and say, ‘Well everyone else will be impacted by mortgage restrictions so we’ll sit back and wait’,” says Dempsey.

Price growth

For those who have been frozen out of the Dublin market, John McCartney, director of research at Savills, says there have been three effects: “Some people have gone back to the family home. However, this is generally not a long-term solution.

“Others have widened their search and bought in the commuter belt. This displacement of demand has contributed to faster house price growth outside Dublin where inflation is now running at 10.8 per cent per annum.

“Finally, many have chosen to stay in Dublin and rent. This has fed into sharply rising rents; the current rate of rental inflation in the capital is over 9 per cent per annum.

“This is attracting buy-to-let investors who are likely to drive a second round of price growth. Arguably, the only long-term effect of the rules will be to change the mix of buyers with more investors and fewer homeowners.”

Settling down: Six suburban homes with asking price cuts

19 Stonepark Abbey, Rathfarnham, Dublin 14

Asking price: down 5 per cent or €30,000 to €550,000

129 Shanliss Road, Santry, Dublin 9

Asking price: down 8.5 per cent or €25,000 to €270,000

3 Field Cottage, Annaville Avenue, Blackrock, Co Dublin

Asking price: down 5% or €30,000 to €595,000

Crosthwaite Park West, Dún Laoghaire, Co Dublin

Asking price: down 14 per cent or €200,000 to €1.25 million

37 Derrynane Gardens, Sandymount, Dublin 4

Asking price: down 8 per cent or €45,000 to €550,000

8 Upper Leeson Street, Dublin 4

Asking price: down 20 per cent or €300,000 to €1.2 million