Home truth: house price growth near standstill

HOUSE prices are almost at a standstill according to latest figures from a Government think-tank.

With interest rates rising and the number of new houses falling, the brakes are being put on the property market.

For each of the past three months the average price of a house has risen by just 0.1% and in January, the cost of a three-bedroom semi-detached house fell.

This is according to research carried out by the Economic and Social Research Institute.

It said the average price of a house in Dublin’s commuter belt fell from €344,186 to €343,696 in January.

However, its economist David Duffy said the results of the latest price index did not sound the death knell for the property market.

“We’ve seen previous moves like this which were completely reversed in the following months’ index,” Mr Duffy said.

The index is hammering home figures released earlier this month which predicted 5,000 less houses will be built in 2007 and the rate of mortgage borrowing is falling.

According to the ESRI, the average house price is now €311,078, 10.6% higher than was recorded this time last year.

The stagnant nature of the market is worse outside Dublin, where for the past 12 months every aspect of the market has grown at a slower pace than in the capital city.

Head of marketing at Permanent TSB, Niall O’Grady, said the rate of price rises is very moderate.

“This gives a clear picture of current trends and potential annual growth for 2007,” he said.

This trend has been unravelling ever since the European Central Bank adopted a policy of increasing interest rates across the continent.

It has had ramifications at every stage of the Irish housing sector.

Earlier this month, Davy Stockbrokers revealed that more than half of all mortgage brokers reported a drop in the amount of borrowing.

They also show less people are entering the market and first-time buyers are now only responsible for a third of all purchases as opposed to 66% two years ago.

The ESRI statistics back up this trend and show the average price paid by first-time buyers rose by half the rate it did for those already on the property ladder.

In January first-time buyers across the country were paying an average of €279,399 which is only €390 more than what they were paying in December.

Davy Stockbrokers are due to release another report on the market this week which is expected to back up what has already emerged since the beginning of this year.