2015 has seen a levelling out of Dublin house price growth following three years of price inflation ending in what could be described as near over inflation in 2014 according to the latest property report from DNG.
House prices in the capital increased by a modest 0.5% in the last three months or 2.3% year on year versus 4.8% for the same three months last year and 24% for the first nine months of 2014. Effectively, after three sets of quarterly results this year, the average price of a resale property in Dublin remains more or less the same as at it was at the end of 2014.
According to Keith Lowe, CEO, DNG the price increases in 2014 caused by deadline for the Capital Gains Exemption Scheme have subsided, with the impact of the Central Bank’s new lending rules now being felt in stable house prices despite large increases in rental values.
Commenting on house prices increasing faster outside Dublin he added: “In contrast, the majority of key urban areas outside the capital are currently experiencing price inflation as the ripple effect from Dublin and indeed Galway City and to some extent Cork City spreads throughout the country. In fact, the price inflation being experienced outside the capital will strongly outperform Dublin this year”
The property market in Dublin has now reached the 50:50 point where prices are still approximately 50% lower than at their peak but have risen by over 50% since the market low point in 2012.
Cash transactions are still very prevalent accounting for between 35% – 40% of the sales on the Property Price Register with approximately an additional 50% being funded from Irish mortgage lenders and the remainder block or loan book sales, according to an analysis in the report.
Further data from DNG Research shows that Ireland lies well behind Northern Ireland, Wales, Scotland and England with on average a third less transactions occurring per 1,000 population. According to the report the Irish property market still has challenges and is clearly still not yet operating normally or even broadly in line with the UK.
The number of properties changing hands in Ireland this year continues to grow with nearly 40% more house sales recorded on the Property Price Register (PPR) in the first six months of this year compared to last. However, an in-depth analysis carried out by DNG Research of the Property Price Register indicates that approximately 20% of all house sales in the capital were multi-unit or block sales in housing developments to single purchasers with a corresponding figure of 10% for the rest of Ireland. This does not include loan book or fund sales many of which are included in the register and could account for another 5% – 10% of total sales which artificially boost the overall PPR numbers.
Calling on the changes to the the Central Rules Mr Lowe added: “The Central Bank’s new loan restrictions are certainly affecting the property market and in particular the first time buyer sector. Some buyers are struggling to meet the revised mortgage criteria and are now opting to stay either in their family home or in rental accommodation for longer which is putting additional strain on the rental sector. A buyer purchasing a first home in Dublin at a relatively average €350,000 must raise a personal deposit of €48,000 and this in our view is not a realistic expectation for many potential purchasers. Therefore DNG are calling on the Central Bank to alter their criteria by increasing the multiplier of salary from 3.5 to 4 and to increase the threshold for 90% mortgages from €220,000 to €300,000. DNG have also suggested that 85% mortgages might apply between the €300,000- €500,000 price band and 80% over that price.”
In the third quarter of the year west Dublin saw the strongest growth in the average value of a home, with prices increasing by greater than the overall Dublin average at 1.1%. Both south and north Dublin saw prices increase more in line with the Dublin average at 0.4% and 0.7% respectively.
The entry level to the market was the best performing sector in the three months to the end of September, with the average price of properties valued below €250,000 rising by 1.2% over the period. Over the last twelve months it has been the entry level to the market that has seen the strongest growth with prices rising by 5.5% on average, year on year. Prices at the upper end of the market performed more in line with the overall Dublin average of 0.5% in the third quarter and 2.3% in the year to September.
In discussing the supply of new housing stock Mr Lowe said “The latest quarterly results of the House Price Gauge show that growth in house prices in Dublin are likely to be less than 5% for 2015 as a whole, as the market shows signs of stability, particularly at the mid to upper end of the market. On the supply side, the output of housing units continues to grow but new completions will still only be marginally higher this year compared to 2014. and the rate of new house completions is still running at around half the rate required to meet demand each year for the country as a whole. As a result, there will continue to be a lack of suitable and affordable accommodation in Dublin and this will underpin house prices and put further upward pressure on rents across the capital in the process. It would appear that the years of under investment in new residential property by the state and private sector is finally taking its toll on both the market and wider society.
Some other key points from the report include:
- Whilst rents are increasing, finance is near impossible to obtain for buy to let mortgages which affects new entrants to the sector. Returns have also become less attractive for investors as new costs such as Property Tax (in the UK it is paid by tenants) and USC charged on rents have been imposed.
- New homes construction in most other areas outside Dublin and the commuter belt is not currently commercially viable due to the low level of sale prices achievable at this time.
Full report available on www.dng.ie