Property prices unlikely to fall in Dublin

Property prices are unlikely to fall in Dublin in the short-term, and may rise by 10 per cent over the next two years , as supply constraints keep pressure on prices.

Launching the Irish Banking Federation Housing Market Monitor for the fourth quarter of 2013 this morning, Ronan Lyons, assistant professor of economics at Trinity College Dublin, said that given the lack of supply in the capital, combined with a loosening of credit, prices may rise by as much as 10 per cent.

“It’s difficult to see how they could increase bymore than that,” he said, adding that prices outside of the capital might fall or rise by about 5 per cent over that same period.

The publication points to a 3.9 per cent rise in residential property prices in Dublin in the last quarter of 2013, and by 1.6 per cent in the rest of Ireland. In Dublin, prices were 15.7 per cent higher in the last quarter of 2013 than in the same period in 2012, the largest year-on-year increase since the fourth quarter of 2006.

The monitor also points to a rise in the number of transactions taking place across the country, with sales up by 10 per cent to 27,500 in 2013.

For Mr Lyons, transaction levels “are the most fundamental baromter of the recovery of the property market”.

Dublin reported a 9 per cent increase in transactions, while Leinster and Munster both saw rises of about 10 per cent. However, this rate of growth slowed in the fourth quarter, with 6 per cent fewer transactions nationally, when compared with the same period in 2012. Dublin showed the smallest Q4 decline, at 1 per cent, with cities other than Dublin reporting a fall of 17 per cent.

For Mr Lyons, one of the “most startling” aspects of the housing market is how few new homes are being built. In 2013, the number of new build completions actually fell by 2 per cent, down to 8,300, although Q4 showed a growth of 7 per cent and there are signs that this is starting to turn in Dublin. In 2013 for example, the number of commencements of new builds in the capital doubled to 1,451, although outside of Dublin a decline of 8 per cent was reported.

However, according to Mr Lyons, about 5-6,000 new builds are needed each year to satisfy demand. As such, he notes that this must be of “huge concern” to policymakers , and adds that if the situation doesn’t improve, he would like to see the government prepare an action plan on housing supply by the end of theyear.