Second-hand house price growth slows to 13.1% last year

Second-hand property prices rose 13.1 per cent during 2004, according to new figures from estate agents Sherry FitzGerald. The rise was down on growth of 14.6 per cent the previous year and 20 per cent in 2002,

However, the chief economist at Sherry FitzGerald, Ms Marian Finnegan, said yesterday that 2004 had proved to be a "surprisingly resilient" year for the property market with the rate of growth in prices far exceeding expectations.

Sherry FitzGerald is now predicting average price inflation of 10 per cent in 2005 and a return to single-digit growth in the medium term.

Last year, the rate of price inflation in the Dublin second-hand market was stronger than the national average. Second-hand properties in Dublin increased in price by an average of 16.6 per cent in 2004, compared to a rate of 12.4 per cent the previous year.

Ms Finnegan said the pace of inflation did ease as the year progressed, with the market showing signs of absorbing the impact of increased supply.

"That said, the very competitive interest rate environment, combined with the underlying strength of owner-occupier demand, facilitated above-trend price inflation for the 12 months to December 2004," she said.

First-time buyers purchased an estimated 36 per cent of all second-hand properties sold during 2004, according to Sherry FitzGerald.

The estate agents said this percentage was likely to increase during 2005 as a result of the raising in the Budget of the threshold at which first-time buyers must pay stamp duty on second-hand properties.

Investors were also active during 2004, with Sherry FitzGerald estimating that they purchased 20 per cent of the second-hand properties sold, only slightly down on the 21 per cent in 2003.

Ms Finnegan said a smaller gap between supply and demand, combined with likely interest rate increases of half to three-quarters of a percentage point, would limit the potential for price growth this year.