House prices jump by 8.4% on average in 2017

The average value of house prices rose by 8.4% in 2017, more than three percentage points higher than the 2016 increase of 5.2%, writes Catherine Shanahan    

Price growth in Dublin was even higher, at 8.8%, according to estate agents Sherry FitzGerald.

Galway, Cork, and Limerick experienced price growth of 8.4%, 7.3%, and 7.4% respectively over the 12-month period.

Sherry FitzGerald group chief economist Marian Finnegan said a strengthening economy, strong employment growth and notable demographic pressures had all led to significant upward pressure on the demand for housing, resulting in a period of heightened price growth.

“This is most notable in the established housing markets of Dublin, Cork, Limerick and Galway, where the supply side pressures are most apparent,” she said.

However, it was worth noting that the average value of new homes sold in the first nine months of 2017 rose by just one percent in Dublin.

This was largely due to the positive impact of the help-to-buy scheme, which offers tax breaks to first-time buyers.

Prior to the introduction of the help-to-buy scheme in July 2016, house builders were largely building for the “trade-up” market Ms Finnegan said, with prices growing by up to 20% in the new home sector.

However, the introduction of the scheme refocused builders on starter homes, with the knock-on effect of a more modest rise in the average value of new dwellings.

Ms Finnegan said she would expect this benefit to filter down to markets in Cork, Limerick, and Galway going forward as more new houses are built. “We would expect to see the average value stabilise in these areas next year,” she said.

According to the latest mortgage market data by the Banking and Payments Federation Ireland, mortgage activity continues to intensify, while the ratio of cash buyers is in decline.

Ms Finnegan said comparing the Property Price Register data to the number of mortgages drawn down, suggests that 42% of single property transactions did not have a mortgage attached during the first nine months of the year. This compares to 47% in the same period in 2016. Ms Finnegan said the uplift in activity in the new homes and mortgage markets “are positive endorsements of the Government’s ‘help to buy’ scheme and the Central Bank’s relaxation of the Macro prudential rules in 2016”.

However, more measures aimed at rapidly increasing supply in all locations were required, “if we are to reduce the pace of price inflation”.

Moreover, further measures were urgently needed to encourage investors to increase the supply of buy-to-let properties in urban centres, to stabilise rental inflation.

Ms Finnegan predicted that the market will continue to experience above trend price growth in 2018 “with current indications suggesting that prices will increase by 6-8% in the established housing markets”.


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