Property prices ‘to rise by up to 7%’

Property prices are set to rise by 5%-7% nationally in the second half of the year, a leading housing analyst has predicted.

David Duffy, an economist with the Economic and Social Research Institute, said he expected house prices to increase in all regions over the coming months.

If Mr Duffy’s prediction is confirmed, it will be the first increase in house prices outside Dublin in six years.

However, the ESRI economist said any return to positive growth in property prices outside Dublin would be at a lower rate than in the capital, which has seen a strong resurgence in prices over the past year, largely due to a lack of supply of family homes.

At the launch of the Irish Banking Federation’s quarterly housing market monitor, Mr Duffy forecast a potential increase of up to 10% in house prices in Dublin. However, he claimed a pick-up in the sector outside the capital would be a more moderate 3%-4%.

Figures published earlier this week by the Central Statistics Office showed that house prices had risen by 2.3% nationally in the past 12 months. However, the CSO reported that an 8% increase in property prices in Dublin was counterbalanced by a 1.5% fall in house prices outside the capital.

Mr Duffy said the IBF report showed there was a number of indicators pointing to stabilisation in the housing market. These included increases in the number of dwellings listed for sale, the number of property transactions and the level of mortgage approvals and drawdowns.

Mr Duffy said such stabilisation was in keeping with other evidence emerging of a slow improvement in the economic outlook for Ireland.

The IBF pointed out there was a 3.3% increase in the number of properties for sale in the second-quarter of 2013 compared to the same period last year. Similarly, there had been an 8% increase in housing transactions and a 9.7% increase in the level of mortgage approvals.

However, the 0.7% increase in the number of actual mortgage drawdowns has led many commentators to suggest the market is effectively stagnant with low levels of activity.

Mr Duffy said at some point “a more positive view of the outlook for the market, reflected in people’s price expectations, will translate into increasing demand for home ownership.”

Mr Duffy said his predictions had factored in the placement of some repossessed homes on the market, although he claimed suggestions that the sector could be flooded with such properties was “overdone.”

IBF retail director Maurice Crowley insisted banks were willing to lend to buyers, despite the fact that there were just 2,857 mortgage drawdowns in the latest quarter.

He claimed banks were now operating on a basis where they were “uncomfortable” if mortgage repayments were greater than 30%-35% of net disposable income.