Irish house price growth slows to 7.8% as market continues to cool

House price inflation continues to slow in the face of higher interest rates and broader cost-of-living pressures.

The Central Statistics Office’s (CSO) latest Residential Property Price Index shows the annual rate of increase in house prices fell to 7.8 per cent in December. This was down from 8.5 per cent in November and from a height of 15.1 per cent in March 2022.

Year-on-year inflation in Dublin fell to just 6 per cent, down from 7 per cent the previous month, while price growth outside the capital fell to 9.3 per cent, down from 9.8 per cent in November and over 17 per cent in March.

Prices in the State’s property market had been on a steep upward trajectory during the pandemic but cost-of-living pressures combined with higher interest rates, which make mortgages costlier, have slowed the level of price growth.

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The European Central Bank has raised interest rates five times since last July in a bid to tame inflation, and its president, Christine Lagarde, has signalled that another half-point move is planned for next month.

While higher borrowing costs globally have dampened activity in property markets, leading to negative price growth in some higher-priced markets, prices here are expected to keep growing in 2023 but at a reduced rate.

The latest figures show households paid a median or middle price of €305,000 for a home in the 12 months to December.

The Dublin region had the highest median price (€429,999) in the year to December. Within the Dublin region, Dún Laoghaire-Rathdown had the highest median price (€625,000), while South Dublin and Fingal had the lowest (€400,000).

The highest median prices outside of Dublin were in Wicklow (€425,000) and Kildare (€370,000), while the lowest price was €152,000 in Longford.

Property prices nationally have increased by 130.3 per cent from their trough in early 2013, the CSO said.

The CSO said there were 5,213 dwelling purchases by households in December, which represents a month-on-month increase of 6.4 per cent. The total value of transactions filed in December was €2 billion.

Commenting on the latest numbers, umbrella group Brokers Ireland said while the rate of increase in prices continues to decline gradually, there is little or no prospect of any dramatic downward change in house prices, given high demand and inadequate supply, a demand recently estimated to be between 42,000 and 62,000 a year every year up to 2050 by the Government’s own Housing Commission.

Rachel McGovern, director of financial services at Brokers Ireland, said: “All interests across society know that the current model of home building is not working. That Ireland is sharing in the global phenomenon where housing provision has become financialised and dependent upon potentially very volatile international funding, should no longer be accepted as the norm and therefore acceptable,” she said.

Trevor Grant from the Association of Irish Mortgage Advisors said while the volume of new homes completed exceeded expectations in 2022, they are still not keeping pace with the demand, never mind making up for the lack of completions in previous years.

“We’re now looking at a potential slowdown in the volume of new home construction in 2023, so it’s difficult to see how the growth in house prices could reverse in the near future,” he said.

“Demand will continue to outstrip supply in 2023 as, even with the interest rates increases, it is still cheaper for most to buy rather than to rent,” he added.