House price inflation slows to 3.9% as interest rates bite

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

The latest Residential Property Price Index shows prices nationally increased by 3.9 per cent in the 12 months to March this year, down from an annual rate of 5.1 per cent in February and over 15 per cent a year earlier.

The was the lowest rate of increase recorded in over two years. On a monthly basis, house prices fell for a third straight month in March - declining by 0.6 per cent - echoing the reversals seen in other countries

The slowdown comes on the back of the most aggressive hike in interest rates ever undertaken by the European Central Bank.

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In a bid to rein in inflation, Frankfurt has lifted its key deposit rate from minus 0.5 per cent to 3.25 per cent in just 10 months, limiting the borrowing potential of buyers.

The latest figures show house prices in Dublin rose by just 1.7 per cent on an annual basis in March while property prices outside Dublin were 5.7 per cent higher than a year earlier. Prices in the capital have been falling on a monthly basis since October. In March, they were 0.9 per cent lower.

The latest figures show households paid a median, or middle price, of €310,000 for a home in the 12 months to March.

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The Dublin region had the highest median price (€435,000) in the year to March. Within the Dublin region, Dún Laoghaire-Rathdown had the highest median price (€635,000), while Fingal had the lowest (€405,000).

The highest median prices outside of Dublin were in Wicklow (€422,500) and Kildare (€377,975), while the lowest price was €154,000 in Longford.

Property prices nationally have increased by 126.6 per cent from their trough in early 2013.

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The latest figures show there 4,132 properties bought by households in March. This represents a 5.4 per ent increase compared with the 3,921 purchases in March 2022 and a 23.3 per cent increase compared with the 3,351 purchases in February this year.

The total value of transactions filed in March was €1.5 billion.

“Pricing continues to weaken in the Irish housing market, led by higher-priced homes in the second-hand market,” Goodbody economist Dermot O’Leary said. “However, pricing and activity continues to grow in the new homes market, reflecting different dynamics around supply, construction costs and government initiatives,” he said.

Ipav, the Institute of Professional Auctioneers and Valuers said while overall prices are levelling off, as would be expected, particularly with rapidly rising interest rates, there are many areas of the country where prices differ from the overall trend and are below where they were in 2006.

Chief executive Pat Davitt said: “Prices are likely to ebb and flow. The unfortunate thing is that the current market favours cash buyers and those with greater resources.”

“We need to get more homes into the market to increase supply and stabilise prices over the medium to long term,” he said.