House price inflation surges to 14.8% – highest in nearly seven years

House prices grew at an annual rate of 14. 8 per cent in January, the sharpest level of growth seen in the market in almost seven years, as demand continues to outstrip supply.

Central Statistics Office (CSO) figures show the State's property market continues to be stoked by pandemic-related factors, such as increased savings, remote working and lower-than-anticipated supply.

“We’re now seeing much larger deposits on the back of the pandemic, primarily down to the fact that some first-time buyers have been able to save up substantial deposits,” Joey Sheahan of consumer advocacy group MyMortgages.ie said.

“ While the cost of buying continues to increase, the cost of renting is almost always higher,” he said.

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The CSO’s headline rate of inflation was up from a rate of 14.3 per cent recorded in December and has risen almost continuously since the start of the pandemic. In Dublin, where supply problems are most acute, prices rose at an annual rate of 13.3 per cent while prices outside the capital were 16 per cent higher.

The figures show the average price paid for a home over the last 12 months was €328,235. The average price in Dublin (€508,471) was the highest in any region or county.

Highest mean price

Dún Laoghaire-Rathdown had the highest mean price in the Dublin region at €706,330, while South Dublin had the lowest at €405,180. The Border region was the least expensive region in the year to January, with the average price paid for a home put at €169,643.

The CSO said the number of property transactions in January rose month on month by 1 per cent to 3,517. The total value of transactions filed with Revenue was €1.2 billion.

The latest figures come amid a strong pick-up in inflation generally and expectations of interest rate hikes in the near future, which will have repercussions for mortgage holders.

Property prices nationally have increased by 115.6 per cent from their trough in early 2013 while Dublin residential prices have risen 120.4 per cent from their February 2012 low.

“The market is currently dominated by buoyant home-buyer demand,” KBC Bank Ireland chief economist Austin Hughes said.

“In the near term, this is underpinned by a strong jobs market and the prospect of faster wage growth in 2022 as well as a rebuilding of household deposits in December 2021 and January 2022,” he said.

“However, increased global uncertainty and the likelihood of rising ECB interest rates later this year as well as the expectation of improved new housing supply may introduce some increased caution into the market,” he said.

“ For these reasons, we may be close to peak pressures at the moment but we may not be at peak prices,” he said.