Property prices up by more than 10% in past year

House prices have climbed by more than 10 per cent in the last year, sparking fears the market is in danger of overheating again.

In its latest report the Central Statistics Office (CSO) noted double-digit growth across the State for the first time in two years, with property experts putting the increase down to a strong economic recovery, a shortage of supply, the Government's help-to-buy scheme and a loosening of Central Bank mortgage lending rules.

The rate of price growth in the west of the country (18 per cent) in the year to the end of April was almost twice the national average (10.5 per cent).

In Dublin, average house prices in areas close to the city centre climbed by some 11 per cent, while the rate of increase was just 2.3 per cent in the Fingal area.

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Overall, house prices are 30.7 per cent lower than at their highest level in 2007 before the economic crash. Dublin residential property prices are 31.3 per cent lower than their February 2007 peak, while residential property prices outside the capital are 35.3 per cent lower than their May 2007 peak.

From the trough in early 2013, prices nationally have increased 52.1 per cent. In the same period, Dublin residential property prices have increased 68.1 per cent, with residential prices in the rest of Ireland up 48.9 per cent.

Restrictions

"I would imagine that the Central Bank and the Department of Finance will be watching these price increases very closely," said Angela Keegan, the managing director of The Irish Times-owned property website myhome.ie

“The last time we saw a double-digit increase the Central Bank moved to restrict lending. They relaxed those restrictions last year, but if we see more credit flowing they might have to act again before the end of the year.”

Keith Lowe, chief executive of estate agents Douglas Newman Goode, played down suggestions that the figures were a sign the market was overheating.

He said the reason such a significant price increase had been record in the west was because it was where the largest post-crash falls were recorded and the market had taken longer to recover. “The area is only really playing catch-up on what has been happening elsewhere.”

He said the Central Bank’s lending rule changes last year, which allowed first-time buyers to borrow more money, combined with the help-to-buy scheme announced in the last budget, had had “an inflationary impact”.

Mr Lowe said there was a lack of supply, and suggested it would take up to two years for the market to return to anything approaching normality.

Very low base

“It really is the key issue, and while we are seeing an increase in the number of new-builds, completions are coming off a very low base. And while buyers might have access to easier credit now then they did several years ago, credit is still a huge problem for builders and that will limit the amount of investment developers can make.”

The Fiscal Advisory Council, the State’s economic watchdog, on Wednesday warned that a sharp increase in the number of new homes being built over the next few years risked overheating the economy. It said that while a stronger supply response was needed to keep prices and rents down, there was a risk that output and employment in the construction sector might increase too rapidly.