House price growth hits three-year low

House prices rose by over 11 per cent in the 12 months to the end of last June, but figures published yesterday show that the rate of growth hit a three-year low during the first half of this year.

The Permanent TSB/Economic and Social Research Institute (ESRI) house price index, published yesterday, shows that the average price paid for a house nationally in June was €245,194, a rise of 11.4 per cent on the same month last year. That compared with a 14.7 per cent increase between June 2002 and 2003.

But the index also shows that, in the first six months of this year, prices grew by 4.8 per cent, as against 6.9 per cent in the first half of 2003. This was the lowest six-month rate of increase since the first half of 2001, when the index also recorded a rate of 4.8 per cent growth.

It is also the lowest rate of growth recorded in the first half of the year since the index began in 1997. In terms of the annual rate, only the 11 per cent increase recorded in November 2002 was lower than the June 2004 figure.

The index shows that steam has been coming out of the market for several months. Prices increased by 11.5 per cent in the year to last May and 12.9 per cent in the 12 months to April.

Launching the half-year edition of the index yesterday, Permanent TSB deputy chief executive Mr Diarmuid Bradley said house-price growth was continuing to moderate.

"There is very strong volume demand but that is being balanced by the supply side," he said.

He added that this would continue to shape the market for the near future, with 82,000 new homes likely to be built this year, compared with 72,000 in 2003.

However, Mr Bradley said Permanent TSB, the State's largest mortgage lender, expected house price growth for 2004 to reach 10 per cent "or a shade under it".

Over the seven-year life of the index, the price of the average house has risen from €75,000 to €245,194. The average paid in Dublin in June was €320,498, compared with €292,359 last year. Outside Dublin, the average price was €215,727, compared with €190,257 a year earlier.

First-time buyers paid an average of €213,566, compared with €194,263 in 2003, while second-time buyers paid €277,010 in June, compared with €246,978 12 months previously. New and second-hand house prices grew by 14.7 per cent and 10.8 per cent respectively in the year to June, compared to 12 per cent for both in 2003.

Mr Bradley said that the rate of property price increases outside Dublin in the first half of 2004 was 5.9 per cent, compared to 4.3 per cent within the capital. He said that, while there was a perception that Dublin always enjoyed a higher rate of growth, that was not the case.

In March 1997, prices in Dublin rose 20 per cent while those outside the city grew 10 per cent. Between then and mid-1998, Dublin spurted ahead to 40 per cent, while those in the rest of the country hit 25 per cent.

A year later growth rates converged and remained more or less parallel with each other, except for periods in 2001 and 2003 when Dublin went ahead, and one stage in early 2002 when growth in the rest of the country went ahead of Dublin.

The Permanent TSB/ESRI house price index figures are based on the bank's mortgage lending returns, which represent between 22-24 per cent of the home loans market.