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News : Property Last Updated: Nov 27, 2013 - 3:22 PM


Irish House Prices up 15% in Dublin; Mortgages issued at 1974 level
By Michael Hennigan, Finfacts founder and editor
Nov 27, 2013 - 3:18 PM

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Irish House Prices rose 15% in Dublin in the year to October 2013 while residential property prices at a national level increased by 6.1%. This compares with an increase of 3.6% in September and a decrease of 8.1% recorded in the twelve months to October 2012. Meanwhile, mortgages issued at a national level are at the lowest since 1974 -- 39 years ago.

Residential property prices grew by 1.8% in the month of October. The same increase was recorded in the previous month and a decrease of 0.6% was recorded in October of last year, according to the CSO.

In Dublin residential property prices grew by 2.3% in October and were 15.0% higher than a year ago. Dublin house prices grew by 2.0% in the month and were 14.6% higher compared to a year earlier. Dublin apartment prices were 18.0% higher when compared with the same month of 2012. However, the CSO says "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) rose by 1.5% in October compared with a decrease of 0.9% in October last year. Prices were 0.3% lower than in October 2012.

Overall Decline: House prices in Dublin are 48% lower than at their highest level in early 2007. Apartments in Dublin are 56% lower than they were in February 2007. Residential property prices in Dublin are 50% 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 47%. Overall, the national index is 47% lower than its highest level in 2007.

The latest figures from the IBF/PwC Mortgage Market Profile, show that a total of 4,482 new Irish mortgages to the value of €750m were drawn down by borrowers here during the third quarter of 2013. This represents an increase of over 12% on Q3 2012 and an increase of over 38.8% on Q2 2013 - - albeit coming from a relatively low base. There were 20,800 approvals in 1974 - - 39-years ago.

David McNamara, economist at Davy, commented - - "With the market seeing the longest run of price rises since 2007, an upturn is now apparent; however, we are a little more circumspect regarding the magnitude of the appreciation in house prices. The index covers mortgage transactions (half of all transactions), of which there have been very few this year. Just 4,051 new mortgages were drawn down in Q3, a pick-up off a very low base of 3,532 in Q3 2012. This means extra volatility in the mortgage-based index – illustrated in an improbable 5.9% monthly rise in Dublin apartment prices.

Total transactions, including cash buyers, should at least match the 25,000 sales in 2012. However, this represents just 1.2% of the total housing stock transacting annually. A more normalised level would be somewhere closer to 3% turnover each year.

Another factor driving prices higher in Dublin is supply constraints. As we have discussed in previous reports, a lack of supply in the capital is now supporting house prices, with an influx of cash buyers compensating for weak mortgage lending and perhaps bidding up the remaining mortgage-backed buyers covered by the CSO index. Housing starts remain at exceptionally low levels, so new supply will take time to come on-stream. Another avenue to free up supply is through repossession of delinquent mortgage holders, but we do not expect wholesale repossessions of householders in arrears given the uncertainty on costs and the work-out time associated with banks taking the legal route."

Simon Stokes from the Society of Chartered Surveyors Ireland, which represents estate agents and valuers around the country, said; "The fact that there was a 7% decline in transactions in Dublin between October and September and an increase in prices reflects the shortage of suitable property coming onto the market and this is resulting in price increases".

The SCSI noted that there was a 15% increase year on year in transactions in Dublin in October 2013 compared to October 2012 but said this was coming off a very low base.

"The CSO figures do not include cash sales which currently make up approximately 60 per cent of the market. It's likely that prices have increased by more than the average in certain locations," Stokes concluded.

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