House prices up 15% nationally, 25% in Dublin

House prices have risen by nearly 15% in the past year, according to the latest figures from the Central Statistics Office.

The Residential Property Price Index for August shows while prices grew nationally by 14.9%, in Dublin property prices have now risen by over a quarter.

This compares with a year-on-year increase of just 5.6% for the rest of the country, excluding the capital.

Housing Minister Paudie Coffey said parts of the country are experiencing the effects from the lack of supply of accommodation, which is leading to an increase in prices due to pent-up demand.

“However the construction sector is beginning to see signs of improvement and it is important that continues so that the sector will normalise and contribute to the economy again,” he said.

However Mr Coffey said that any improvement in the construction sector must be seen in the context of the substantial contraction experienced from 2006 to 2010.

In that time the number of employed bricklayers fell by nearly 82%, with similar decreases in the number of employed labourers (78%), plasterers (71%) and architects (61%).

Mr Coffey said that the sector should be capable of sustaining around 12% of GNP but that Forfás, the Department of Enterprise’s advisory board, estimates that in 2012, the construction industry contributed just 6.4% of GNP.

Conall Mac Coille, chief economist at Davy, said that the Irish housing market “remains exceptionally illiquid”.

“In the first half of 2014, there were just 15,688 residential property market transactions, comprising around 0.8% of the housing stock. This suggests that the average house is being sold once every 64 years at current transaction rates,” he said.

The index is compiled using data on mortgage drawdowns provided on a monthly basis by eight of the main mortgage lending institutions and does not include cash-based transactions.

“Cash buyers continue to account for over 50% of transactions, hurting Irish banks’ ability to lend to first-time buyers, increasingly struggling to compete with investors attracted by rising rents, the lack of housing supply and capital gains tax exemptions,” Mr MacCoille said.

He added that repossessions of buy-to-let borrowers who are in arrears remain negligible.

“In time, however, banks will need to take action to repossess these delinquent borrowers, freeing up the pool of properties for first-time buyer,” he said.

Environment Minister Alan Kelly has already stated his desire to have provisions in the budget for the development of a social housing programme and it is believed that plans are also under way to address issues facing the affordable housing sector and first time buyers.