House prices rise at three times rate of inflation

THE Government was urged last night to intervene as house prices continue to rise at three times the rate of inflation.

Fine Gael environment spokesman Fergus O’Dowd said first-time buyers were being priced out of the market. He claimed the Government was taxing the average house buyer by over €100,000.

Mr O’Dowd said: “The Government is now earning record amounts from house buyers as 45% of the price of every house sold accrues to the Exchequer in taxes, including development levies and VAT.”

Labour spokesman Eamon Gilmore called for a total shift in Government policy. He said there must be “some measure of payback” for families struggling to afford their own home.

Latest figures show the average house price was €277,852 last December - up nearly €25,000 on the year. And the average price paid by a first-time buyer is now €249,499.

A surge in house prices in the second half of 2005 brought the annual increase to 9.3% while for first-time buyers prices rose 12.7%.

Permanent TSB marketing head Niall O’Grady said high confidence in the economy was behind the higher than expected spurt in house price growth.

Economists had been projecting annual growth in the house market of 5% to 7%, after a modest 2.5% rise in the first six months of 2005.

But the rate jumped by 6.7% in the second half of the year, according to the Permanent TSB house price index just published.

Mr O’Grady said: “Looking ahead at price growth this year strong demand looks set to remain a major factor, though the likelihood of further interest rate increases may act to dampen its impact somewhat, especially so in the second half of 2006.

“At this stage we’re anticipating an average rate of price increase of approximately 10% - with some significant variations regionally and within different market sectors.”

On a county by county basis, prices in Kerry jumped by 15% for the second year in a row - spurred by people buying second homes there.

Leitrim prices rose by just 2%. In Dublin and its commuter counties of Louth, Meath, Kildare and Wicklow house prices rose by just over 10%.

Mr O’Grady said part of the explanation for the rate of house price growth by first-time buyers might be the number (54%) buying existing, rather than newly-built, houses.

Between January 1997 and December 2005 national house prices rose by 249%, by 299% in Dublin and 225% outside Dublin.