House prices climb despite warning

HOUSE prices rose by 1.3% in April, despite warnings that property values are set to topple by 20%.

The latest edition of the Permanent TSB House Price Index shows there is no let-up in the ever soaring cost of housing as the April figures represent a slight increase on the 1% growth experienced in March.

However, the annual rate of increase eased for the second month in a row.

So far in 2003, house prices have grown by 4% with the average price paid for a house nationally last month being 214,146.

Overall the index, which is compiled in association with the ESRI, shows house prices have risen by 12.7% since last year. The average price for a house 12 months ago was 190,023.

However, the figures record a slowdown in the annual rate of increase with last month’s 12.7% down from a high of 15.4% in February.

“The rise in April was slightly higher than we might have expected. However, the continued moderation in the annual percentage increases suggest that we are continuing to see some moderation in the rate of growth,” said Permanent TSB head of marketing, Niall O’Grady.

Evidence that Dublin house prices might have peaked is suggested by the fact that growth in the price of housing in the capital rose 0.4% compared to 1.3% for the rest of the country.

On an annual basis, house prices in Dublin grew by 15.7% in Dublin and 10.1% elsewhere on year to April 2003.

The average price paid for a house in Dublin last month was 279,815, while it was 186,025 for property outside Dublin.

Prices also continued to rise noticeably for first-time buyers with new home-owners experiencing a rise of 2.7% on the previous monthly figures. The same figure for second-time buyers was just 0.6%.

Average prices in April 2003 for first and second-time buyers were 188,081 and 240,430 respectively.

The average cost of new homes also rose by 1.9%, while there was a greater slowdown in the price of existing homes at 0.6%. The average price paid for a new home in April was 209,640.

Meanwhile, estate agents have reacted angrily to a leading report by The Economist which predicts a major collapse in the value of housing in Ireland and several other countries including the US and Britain.

The Gunne Group dismissed the study as “another in a line of ‘doom and gloom’ reports” which have regularly predicted the demise of the residential housing market.

“It is most frustrating for us that reports of this nature which mislead the general public continue to be published,” said Marie Hunt, Gunne’s head of research. “The fundamentals of the Irish housing market are still extremely strong with an imbalance between supply and demand, particularly in the Dublin market, driving activity and prices.”

Ms Hunt said low interest rates and prudent lending policies would ensure the risk of negative equity was negligible. A spokesperson for property firm Sherry FitzGerald said the Economist’s arguments did not take into account local issues which affected the Irish market.

Meanwhile, the annual growth rate of private sector credit in Ireland eased slightly in April to an adjusted 15.8% from 16% the previous month, the central bank said yesterday.

The Central Bank noted the rise had been steady at close to 16% since the start of the year.