Second-hand home shortage to drive Dublin house prices up 10%

HOUSE prices in Dublin will rise by 10% this year, according to one of the city’s leading estate agents, because of a shortage of second-hand homes coming on the market.

A new report by Gunne estate agents shows a slight drop in the number of second-hand houses coming on the market in the first three months of the year compared to the same period in 2004. The supply shortage, the report says, is driving prices higher.

Gunne research estimates that second-hand house prices will rise by 10%, compared to a 6% forecasted rise for new homes.

“As we approach equilibrium between supply and demand in many locations throughout the country, it is inevitable that the phenomenal rates of annual house price inflation in recent years will not be sustainable,” the report says. “However, if developers and their lending institutions are prudent in terms of supplying the market, we are likely to see growth of between 4% and 6% in new house prices across the country in 2005, a level which is likely to be exceeded in areas of Dublin and core cities and towns throughout the country.”

The report also says changes to stamp duty rates have fuelled demand for second-hand houses in the capital.

Gunne analyst Shane Brady added: “However, we do not expect an excessive exodus of first-time buyers opting to purchase second-hand homes as opposed to new homes due to the inherent differences between the two, the obvious being price.”

Unsurprisingly, demand for houses in south Dublin remains the strongest, with nearly a fifth of all homes changing hands for over €1 million. The cheapest homes are in the west of the city with 63% of all houses sold for between €250,000 and €500,000.

The report spells out bad news for property market investors with rents barely increasing in the first quarter. Since 2002, rental income has fallen by 19%.

A three-bed house in south Dublin costs €1,620 a month with a one-bedroom apartment in west Dublin yielding €850 a month.

The report predicts that investment in the residential property market will ease as house price inflation slows.

Gunne is also expecting a slowdown in the number of new house-building from nearly 80,000 homes completed in 2004 to 65,000 this year.