House price surge: Government scheme, new lending rules blamed

House price price inflation picked up significantly in the first three months of the year, making the return to double-digit growth more likely.

Two quarterly reports, from property websites MyHome.ie and Daft.ie, linked the latest price acceleration to the Government’s new tax incentive scheme for first-time buyers and a loosening of the Central Bank’s mortgage lending rules.

MyHome's report, produced with stockbroking firm Davy, suggested annual house price inflation is running at 9 per cent nationally and at 10.2 per cent in Dublin, where supply shortages are most evident.

House price inflation in the capital had all but stalled this time last year, dropping to 1 per cent.

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According to MyHome, the average asking price nationally was €239,000, up €12,000 on the previous quarter, while the figure for Dublin was €347,000, a rise of €19,000.

The report’s author and chief economist at Davy, Conall Mac Coille, said Ireland’s strong recovery, the Help to Buy scheme, looser credit conditions and the lack of housing supply are all likely to make it a frothy year for Irish house price inflation.

“Credit conditions are clearly supporting the market,” he said, noting the average mortgage approved to first-time-buyers in February was €206,500, up by 15.2 per cent from €179,000 last year.

"This must in part reflect the relaxation of the Central Bank rules, eliminating restrictions on the availability of 90 per cent loan-to-value mortgages," Mr Mac Coille said.

He also noted that while homebuilding activity had stepped up, it was still too slow. Excluding the boom years, he said the 14,900 homes completed in 2016 represented the lowest number of homes built in Ireland since 1970.

South Dublin

A separate report by property website Daft.ie suggested house prices rose by an average of 4.3 per cent during the first three months of the year.

It said the average price of a house in the State is now €230,000, some 9.4 per cent higher than this time last year, and more than €65,000 higher than it was four years ago. The year-on-year price increase in Dublin was put at 8.7 per cent.

The report said Dublin prices had risen by an average of €17,500 in the first three months of 2017, and by €120,000 in the last five years.

South County Dublin remained the most expensive place in the State , with average asking prices of €548,000.

The State's other four main cities all recorded double-digit growth. In Galway and Limerick, average asking prices were 16 per cent up on last year, while in Waterford and Cork they rose by 13.9 per cent and 10.7 per cent respectively.

The Daft.ie report said the number of homes on the market was at a record low, with just 20,500 properties for sale nationwide in March 2017, the lowest recorded by the company since it started its reports in January 2007.

Both the change in mortgage rules for first-time buyers and the Help to Buy incentive are making it easier for first-time buyers – by far the largest chunk of the market – to bid prices higher, said the report's author and Trinity College Dublin economist Ronan Lyons.

Minister for Housing Simon Coveney responded to the figures by saying that "new housing supply at scale is now crucial".

“There is no quick fix for supply but all the indicators show that it is responding well to increased demand, with higher planning activity, up by more than 20 per cent on last year; higher commencements, up by 44 per cent since January 2016; and completion levels and growing numbers in employment in the construction sector,” he said.

However, Sinn Féin finance spokesman Pearse Doherty called for the Help to Buy scheme to be suspended to allow a full review "before too much damage is done to the housing market".

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