A shortage of supply is driving up house prices with sales in Dublin skewing national figures and talk of a recovery premature, according to analysts.
Property prices are up more than 6% nationally over the last year with continued evidence that demand in Dublin is driving the revival.
In October, the value of homes nationwide increased 1.8%, the same as in September, while the popularity of some areas in Dublin and a lack of supply pushed prices up there by 2.3%.
According to the Central Statistics Office (CSO), the property market in the capital is up 15% over the last year with house prices jumping 2% last month.
Over the last 12 months apartment prices have seen some of the strongest revivals, up 18%, although experts warned there have only been low volumes of sales in the sector and figures are subject to volatility.
The residential property price index found that house prices in Dublin are 48% cheaper than the peak in early 2007 and outside the capital the market is down 47%.
David McNamara of Davy’s said while property prices rose for the seventh consecutive month in October, the low level of mortgage transactions was adding to volatility in the figures.
“With the market seeing the longest run of price rises since 2007, an upturn is now apparent. However, we are a little more circumspect regarding the magnitude of the appreciation in house prices. The index covers mortgage transactions [half of all transactions], of which there have been very few this year.
“Just 4,051 new mortgages were drawn down in Q3, a pick-up off a very low base of 3,532 in Q3 2012. This means extra volatility in the mortgage-based index — illustrated in an improbable 5.9% monthly rise in Dublin apartment prices.”
Davys said total house sales, including cash buyers, should at least match the 25,000 sales in 2012.
However, with a shortage of supply driving prices in Dublin and housing starts at exceptionally low levels, prices will continue to rise next year — but at a lower rate.
Simon Stokes from the Society of Chartered Surveyors Ireland, which represents estate agents and valuers, said the fact there was a 7% decline in transactions in Dublin between October and September, and an increase in prices, reflects the shortage of suitable property coming onto the market.
The SCSI said the 15% increase year-on-year in transactions in Dublin was coming off a very low base.
“The CSO figures do not include cash sales, which currently make up approximately 60% of the market. It’s likely that prices have increased by more than the average in certain locations,” Mr Stokes concluded. Meanwhile, the latest mortgage approval figures from the Irish Banking Federation (IBF), show 1,879 mortgages worth €347m were approved by lenders during October.
The report shows:
- Mortgage approvals increased by 12% year-on-year and 12.3% in the month;
- The value of mortgages approved in October was €347m, the highest level since the series began in 2011;
- The value of mortgage approvals grew by 22.3% in the past year.
By Seán McCárthaigh
Is the madness that surrounded the property market during the Celtic Tiger boom about to begin again?
Struggling homeowners could be forgiven for experiencing déjà vu at the prospect of another property bubble, through one recent example.
A house in the upmarket south Dublin suburb of Rathgar, which sold in Nov 2011 for €440,000, is back on the market with an asking price of €695,000 — a whopping 58% increase.
The dramatic increase in the price of 27 Eaton Brae, Orwell Rd, Rathgar, became something of an online sensation after it was highlighted by broadsheet.ie.
Will Moore, of Sherry Fitzgerald’s in Terenure, which is handling the sale, said he believed the current seller obtained the property for a great price when he bought it two years ago, just before what many estate agents regard as the bottom of the market.
“It’s a great house in a great location,” said Mr Moore. “It’s detached and its back garden is west-facing.”
Mr Moore said the driving force for recent price hikes was the lack of supply, which has been particularly notable in certain parts of Dublin.
“At any one stage, about 3% of all housing stock is up for sale but this is as low as 0.9% in some suburbs,” he said. “The owner has added value and the market has improved.”
Asked if the price of €695,000 was justifiable, Mr Moore replied with words that might send a chill down on the finances of all prospective buyers: “We will see.”
© Irish Examiner Ltd. All rights reserved