House prices slip back 1% but still up on last year

House prices dipped 1 per cent in the final three months of last year, according to the latest report by property website Daft.ie. This is the first time since mid-2013 that the average house price fell compared with the previous quarter. Prices fell nationally and in the capital, with Dublin prices slipping back by 0.7 per cent, the first drop there since mid-2012.

Would-be house buyers may have lowered their expectations of the amount they can borrow in light of the proposed Central Bank limits on mortgage lending, the report says.

Average price

However, the average asking price for a home nationwide is still 12.8 per cent higher at €193,000 than it was a year ago, Daft’s

2014 Year in Review House Price Report

shows. This compares with a peak average asking price of €378,000 in 2007 before the property bubble burst.

Annual house price inflation in Dublin has eased from a high of 25 per cent in September to 20 per cent in December. But the market is far more active than it was in 2013. More than 3,500 properties were listed for sale in Dublin on December 1st, 2014, which was a third more than on the same date a year earlier.

Cork and Galway cities saw price falls of 1 per cent in the fourth quarter of 2014, while Limerick and Waterford cities saw falls of between 3 per cent and 4 per cent. Outside the main cities, the average asking price across the country fell by 1.3 per cent, but remains 7.6 per cent higher than at the same time last year.

Trinity College Dublin economist Ronan Lyons, the author of the Daft.ie report, said it seemed the Central Bank's proposed limits on mortgage lending – which require most housebuyers to have a 20 per cent deposit – were having an impact on the market even though they have not come into force.

“When asked what they expected will happen Dublin house prices over the coming 12 months, survey respondents in September expected an increase of 12 per cent. In December, however, that figure had fallen to 5 per cent,” Mr Lyons noted. “Restricting the amount lent to each household is a necessary first step to ensuring a stable housing market. The second step is addressing the cost base, to ensure an adequate supply of housing,” he added.

“With fewer than 30,000 properties on the market currently – and just 3,500 of those in Dublin – this is the challenge for policymakers as we move into 2015.”

This shortage in supply is evident across the Irish housing sector, “from the working homeless ‘living’ in hotels to the desperate lack of student accommodation, from the lengthy social housing waiting lists to wealthy first-time buyers bemoaning the lack of homes to choose from”.

Rate cut

Meanwhile,

Permanent TSB

is to cut mortgage rates for new customers by between 0.36 per cent and 0.42 per cent from January 12th. Permanent TSB’s highest variable rate, for borrowers with a deposit of less than 20 per cent but more than 10 per cent of the property price, will fall to 4.2 per cent, down from 4.59 per cent.

Its lowest variable rate, for customers who borrow less than 50 per cent of the property price, will drop to 3.7 per cent, down from 4.05 per cent.

Its head of mortgages Richard Kelly said the lender hoped to grow its market share. It currently stands at 13 per cent.

“We will continue to provide mortgage credit to those customers who demonstrate affordability and are creditworthy,” Mr Kelly said.

The Central Bank is expected to confirm its plans to tighten controls on property lending later this month.