House price inflation accelerates to 12.3 per cent

Property prices have accelerated again with a jump of over 12 per cent recorded nationally for the 12 months to the end of July.

The latest official figures from the Central Statistics Office (CSO) show property price inflation is now running at 12.3 per cent, its fastest pace in over two years.

It also compares with a year-on-year increase of 11.5 per cent recorded in June and an increase of 7.1 per cent in the 12 months to July 2016.

In Dublin, where supply pressures are most acute, the rate of growth was even stronger at 12.7 per cent.

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The highest house price growth was in Dublin City at 13.6 per cent while the lowest rate of growth of 7.4 per cent was recorded in Fingal.

In the year to July, the average market price paid by households for a dwelling was €260,903, or €413,045 in Dublin. Over the year, Dún Laoghaire-Rathdown was the most expensive area to buy a house in Ireland, with an average price of €583,862. The least expensive county in which to buy a house was Co Longford, with an average price of €95,138

The CSO’s latest report comes in the wake of a separate study by estate agent Sherry FitzGerald, which found that the supply of second-hand homes to the market had actually fallen in the 12 months to July despite the increased level of demand. Both reports are likely trigger fresh fears that the market is overheating again.

The CSO’s report shows prices in Ireland, excluding Dublin, were 11.7 per cent higher in the year to July. The West region enjoyed the greatest price growth, with prices increasing 15.8 per cent while the Mid-West region recorded the lowest price growth, with house prices increasing 8.2 per cent.

Despite the persistence of double digit price growth, the CSO’s index suggests price nationally are still 28.1 per cent lower than their highest level in 2007.

From the trough in early 2013, prices have increased by 60.5 per cent, the figures show. In the same period, Dublin residential property prices have increased 77.4 per cent while residential property prices in the rest of the country, excluding the capital, are 51.2 per cent higher.

Mortgage lender KBC Ireland said the intensity of pent-up demand and inadequacy of new supply was underpinning the strong price trend, particularly in Dublin.

It said the growth in the number of residential property transactions in Dublin outpaced the increase in prices through the second half of 2016, albeit from a low base.

“However, the increase in activity has slowed markedly of late even as the pace of increase in prices has picked up, highlighting an increasing shortfall in supply relative to notably strengthening demand,” it said.

In contrast, KBC said the trend in transactions outside the capital had shown a more consistent if modest growth of late. “This has translated into a steadier if still strong pace of property price inflation outside Dublin,” it noted.

Financial firm Davy recently updated its housing demand forecasts, suggesting that between 35,000 and 50,000 units may need to be built each year to meet the current level of demand. The update was based on Census 2016, which revealed that the population was 2 per cent larger than preliminary estimates.

Responding to the latest CSO numbers, Davy said: “These punchy gains look set to persist as demand outstrips supply in the near term.”