House price inflation has almost halved as supply increases

House price inflation has almost halved in 2004, a slowdown which reduces the chances of a property price crash, but which could lead to problems for some investors.

According to previously unpublished figures for November of this year house-price inflation was about 7.5 per cent, down from 12.2 per cent in November 2003.

Permanent TSB, which compiles the figures, said the net price increase for the whole year will be in the region of 8 per cent.That compares to house price increases of 13.8 per cent in 2003.

According to the Construction Industry Federation stabilising prices are the result of a rapid increase in supply. In parts of the administrative areas of south Dublin and Fingal County Council "where development is unimpeded", there had been zero house price inflation in the first nine months of this year, said a spokesman, Mr Hubert Fitzpatrick.

A spokesman for Permanent TSB said November's figures would show a drop to about 7.5 per cent, and the influence of December would bring the whole-year figures to about 8 per cent.

Lower house-price inflation, he said, was good for first-time buyers but might disappoint some investing in property.

Investors who have placed deposits on apartments and houses which have yet to be completed were essentially hoping for large price increases as well, he said. Permanent TSB is predicting increases as low as 6 per cent for next year.