‘Two tier’ divide in housing market as prices rise and fall across country

Economists have warned of a deepening of the “two tier” divide in the housing market as residential prices in Dublin rose once more year-on-year while those outside the capital fell once again.

However, they have also predicted that over the course of 2013, while there will be a “low single figures” drop in prices, it will be smallest annual decrease in the past six years.

Nationwide, property prices rose for the second consecutive month in May increasing by 0.3% according to the latest figures from the Central Statistics Office. However, year-on-year they fell by 1.1% compared to May 2012 — though that compared to a fall of 15.3% in the year to May 2012.

In Dublin, residential prices [houses and apartments] grew by 0.5% from April and were 1.4% higher than a year ago — house prices in the capital grew 0.5% in the month and were 1.3% higher compared to a year earlier.

The price of residential properties in the rest of the country, excluding Dublin, grew by 0.1% in May but were 2.8% lower than in May 2012. House prices alone rose 0.4% month-on-month but fell 0.9% year-on-year.

Philip O’Sullivan of Investec Ireland Economics said it had been flagging a the ‘two tier market’ theme in the residential property market for some time. He said that meant stronger readings seen in Dublin, than the rest of the country, where oversupply retained a dampening effect on prices.

“Looking ahead, we expect this divergence to continue, given both the much tighter supply dynamics in Dublin and the support provided by a strong rental market in the key urban centres,” he said. “Earlier this month we noted that CPI data reveal that the current annual rate of growth in private rents (5.6%) stands at its highest level since July 2008.”

Alan McQuaid of Merrion Stockbrokers said the latest rise in residential property prices was encouraging.

“But anecdotal evidence suggests consumer confidence regarding the housing market still remains fragile, with the ending of mortgage interest relief and lack of credit availability depressing activity,” he said. “The weak labour market is also weighing negatively on house prices, though recent signs of improvement on the employment front should boost the property market as the year goes on.

“It is difficult to make a call on the housing market at this stage. House prices were down 11.2% on average in 2012 and indeed have fallen on average in each year since 2007. The odds point to another drop in 2013, but our gut feeling is that the decline will be in low single digits and the smallest annual decrease in the past six years.”