Help-to-Buy scheme ‘fuelling house price rises’, says economist

There is “now little doubt” that the Government’s Help-to-Buy scheme has fuelled property price hikes, according to an economist, with latest figures showing the highest rise in prices in two years.

According to the property price index from the Central Statistics Office (CSO), house prices have more than doubled nationally since the collapse of the property market in 2013. 

Residential property prices rose nationally by 10.7% in the year to February, the largest increase since May 2015.

This compares with an increase of 8.1% in the year to January and an increase of 5.4% in the 12 months to February 2016.

In Dublin, residential property prices rose 8.3% in the year to February. Dublin house prices rose 8.1%, whereas apartments rose 9.1% in the same period.

The highest house price growth was in Dublin city, at 9.2%, while the lowest growth was recorded in Fingal, with house prices rising just 3.7%.

Residential property prices across the rest of the country were 13.2% higher in the year to February.

House price rises were most pronounced in the west, which recorded an increase of 19.8%, while the mid-east region showed the lowest price growth, at 9.3%. Apartment prices outside of Dublin increased 13.9% in the same period.

Despite the continuing prices rises, they still remain just over 30% lower than the peak in 2007.

However, since the collapse of the market in 2013, prices have risen by more than 52%.

The 10 most expensive Eircode areas in the country are all in Dublin. Dublin 6 came out on top, with an average price of €724,711. 

Dublin 4 was the second most expensive area, where the average house price is €711,919, followed by Blackrock at €648,347.

Outside of Dublin, the Co Wicklow towns of Greystones (€402,939) and Bray (€364,065), along with Kinsale (€357,447) in Cork, boast the most expensive houses.

The least expensive Eircode area over the last year was Castlerea, Co Roscommon, with an average price of €69,808. 

The second least expensive area was in Clones, Co Monaghan, where the average price was €78,152, followed by Ballyhaunis in Mayo, which had an average price of €84,727.

Economist Conall Mac Coille of Davy said there is “now little doubt” the loosening of Central Bank mortgage lending rules and the Help-to-Buy scheme had fuelled rising prices.

“Ireland’s robust economic recovery was always likely to lead to significant house-price rises. The key uncertainty is how much extra momentum to Irish house-price inflation has been added by the Help-to-Buy scheme and the loosening of the Central Bank mortgage lending rules. The sharp gains in the early part of 2017, when price rises are normally muted, indicate that our forecast for 10% house-price inflation might even be too pessimistic,” he said.

Dermot O’Leary of Goodbody said the scarcity of supply “continues to be the major reason for upward price movements”, a situation unlikely to be resolved in the short-term. He also said the figures may be overstating the amount of new supply in the market.

“Focusing solely on new home transactions, the CSO data, generated from stamp duty returns, shows that 4,407 units were transacted in the 12 months to February. This compares to the 15,256 ‘completions’ according to the Department of Housing.

“If we strip out self-build, the new completions figure would fall to circa 8,500. It does not seem plausible that roughly half of completed homes have not been purchased over the past 12 months, adding further evidence to the view that the official completion figures are overstating the scale of new supply,” he said.

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