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News : Property Last Updated: Mar 26, 2013 - 1:22 PM

Irish House Prices: In the year to February 2013 residential property prices fell by 2.6%
By Finfacts Team
Mar 26, 2013 - 1:19 PM

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Irish House Prices: In the year to February 2013, residential property prices at a national level, fell by 2.6%, according to the CSO.

This compares with an annual rate of decline of 3.3% in January and a decline of 17.8% recorded in the twelve months to February 2012.

Residential property prices fell by 1.5% in the month of February. This compares with a decrease of 0.6% recorded in January and a decline of 2.2% recorded in February of last year.

In Dublin residential property prices fell by 0.3% in February but were 3.0% higher than a year ago. Dublin house prices fell by 1.0% in the month but were 2.5% higher compared to a year earlier. Dublin apartment prices were 7.8% higher when compared with the same month of 2012. However, it should be noted that the sub-indices for apartments are based on low volumes of observed transactions and consequently suffer from greater volatility than other series.

The price of residential properties in the Rest of Ireland (i.e. excluding Dublin) fell by 2.1% in February compared with a decline of 3.0% in February last year. Prices were 6.1% lower than in February 2012.

Overall Decline: House prices in Dublin are 55% lower than at their highest level in early 2007. Apartments in Dublin are 59% lower than they were in February 2007. Residential property prices in Dublin are 56% lower than at their highest level in February 2007. The fall in the price of residential properties in the Rest of Ireland is somewhat lower at 49%. Overall, the national index is 51% lower than its highest level in 2007.

Dermot O'Leary, chief economist at Goodbody, comments: A third consecutive decline puts Irish residential prices at a new low despite some signs of improvement in certain segments of the market.

"Price transparency may be affecting price levels: Given the recent signs of stability in the Irish housing market, the 1.5% price decline in February will be seen as somewhat of a disappointment. The third consecutive monthly decline on the official CSO data leaves residential prices at a new low, some 51% below the September peak. While mortgage activity levels picked up over the second half of 2012, increased price transparency as a result of the new residential property register could potentially be having a negative impact on the price levels. However, regional differences are a key element of the latest housing market data.

A post MIR slowdown is evident in the transaction data: The Property Price Register shows that transactions registered thus far for February fell by 8% yoy. This follows an average annual increase of almost 60% in the final quarter of 2012, highlighting the impact of the expiration of mortgage interest relief (MIR) at the end of 2012. On an underlying basis the trends remain broadly positive with transactions for January and February combined up 5% on the same period in 2012 and up 34% on a twelve month rolling basis. However, the effect of MIR will continue to distort transaction data over the coming months.

Regional divergence continues: Despite the volatility in the monthly data positive momentum continues to be driven by Dublin where property prices rose on an annual basis (+3% yoy) for a second month in a row supported by tight supply conditions. House prices in the capital increased by 2.5% yoy and apartments by 7.8% yoy. Outside the capital property prices fell 6% yoy, driven by a 2.9% fall in house prices continuing the regional divergence that has been in evidence for the past 12 months. Low transaction volumes in the apartment sector is more than likely to be responsible for an anomaly that has meant that prices in this category are now rising at an annual pace of 6% nationally and 8% in Dublin.

An uneven recovery: Any recovery in the Irish housing market is unlikely to be a uniform one. It will be driven by local considerations on supply and demand. In this regard, the capital and surrounding areas stack up better in terms of available supply and expected demand due to labour market developments. Increased foreclosures for the buy-to-let sector in the coming quarters may have some impact on certain segments of the market too. Nevertheless, the scale of the decline in prices in Ireland (average prices have fallen further than the official index suggests due to the non-inclusion of cash sales) is such that valuations have now returned to 'affordable' levels, based on price/income ratios and rental yields. Continued mortgage availability is key to recovery."

David McNamara, economist at Davy, comments: "Property prices fell 1.5% in February following a 0.6% decline in January. This sharp monthly contraction brings property prices below the previous low point of June 2012. Overall, prices are now 50.7% from their peak. Recent trends in the CSO data show a two-speed market developing: prices in Dublin are up 3% year-on-year (yoy) in February, buoyed by a lack of supply in some areas, while the overhang of stock outside the capital continues to weigh on prices nationally.

Property prices fall 1.5% in February

Property prices fells for a third consecutive month in February, a 2.6% decline on the year. The sharp fall in the index is the largest monthly decline since January 2012 and brings the index below its previous low point of June 2012. House prices fell 1.6% (-2.9% yoy) and apartment prices rose 7.1% (+6.4% yoy) - - a lack of transactions in apartments likely adding to monthly volatility rather than any strong rebound in prices. In Dublin, property prices fell 0.3% but are up 3% on the year. Outside the capital, prices continued to slide, falling 2.1% month-on-month, a 6.1% decline yoy. Overall, property prices are 50.7% from their 2007 peak, 55.9% in Dublin.

What is now apparent is the development of a two-speed market in Ireland: prices in Dublin have recorded two consecutive months' growth yoy, while prices outside the capital continue to slide. Supply shortages in some Dublin areas are now beginning to exert upward pressure on prices, while the glut of stock outside the capital will continue to weigh on prices.

Liquidity slowly improving; transactions up on 2012: Provisional data from the Property Price Register showed 2,769 transactions in the first two months of the year, a 4.8% rise on the year. The growth in transactions is mainly outside the capital with the transactions in Dublin (accounting for about one-third of the market) essentially flat yoy. Improved liquidity in the market, particularly outside the capital, as well as the impending property tax may now be exerting downward pressure on prices, with the transparency of the Property Price Register providing buyers with price information for comparable properties. The fact remains that transactions, of which close to half are cash buyers, remain at unsustainably low levels."

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