House prices continue to head higher, with the latest figures from the Central Statistics Office showing a 7.9 per cent annual increase in May, up from 7.6 per cent the previous month. While there are some regional variations, prices for both houses and apartments are increasing across the State. Those who want to buy are having to pay up.
Nor is there any sign in the short term that the trend is going to change. Demand remains strong with wages and employment on the rise. Also, as well as new buyers, there are a large number of people with mortgage approvals who have yet to find a property to buy and are continuing to search. Supply, meanwhile, remains inadequate.
The result is higher prices and a scramble for properties that are coming on to the market. In terms of transactions, the biggest growth by far is in the first-time buyers market and much of this is concentrated in Dublin and the commuter counties. These borrowers are taking on ever larger mortgages – supported by higher earnings and also, in many cases, by financial support from their families.
One concern must be that at least some of these borrowers are taking on very large mortgages and a significant amount of financial exposure, notwithstanding the Central Bank borrowing rules. In turn Government demand supports – the Help-to-Buy and First Home schemes – are allowing buyers to take on more expensive properties. Such is the state of the rental market that despite large mortgage bills, outgoings are in many cases less than would be required in the rental market.
RM Block
That new borrowers are having to take on this scale of loans is of concern at a time when the economic outlook is uncertain. A trade war between the US and EU would certainly hit employment and earnings growth.
The difficulty for both borrowers and lenders is that the scale of this threat is impossible to calibrate. So, for now at least, property prices continue to head upwards. Whether their current level is justified by economic conditions is, however, now very much open to question.
