Dublin house prices rise as prices elsewhere fall

There was further proof of a two-tier housing market yesterday with confirmation that prices in Dublin rose by 15.7% over the last year while prices in rest of the country fell by 0.4% over the same period.

According to the Central Statistics Office’s residential property price index (CSO), prices on a nationwide basis grew by 0.3% in the month to December.

That was ninth successive monthly national gain and meant the annual increase over the year to December was 6.4%.

However, when that latter figure is broken down, it shows that the positive increase was as a result of the gains in Dublin.

The CSO found that, in the capital, residential property prices grew by 0.3% in December and were 15.7% higher than a year ago.

However, while the prices in the rest of Ireland rose by 0.1% in the month to December, they were 0.4% lower than in Dec 2012.

Juliet Tennent of Goodbody Economists said the regional divide in price performance remains “stark”.

On a more positive note, however, Ms Tennent pointed out that following a weak November when housing transactions fell approximately 8% year-on-year, transactions in December recovered somewhat to rise by 1% year-on-year.

“Quarter four transactions were 12% lower than in the same quarter in 2012, which benefited from the mortgage interest expiry,” she said.

“Overall, transaction levels rose 13% to 28,500 in 2013. This represents 1.4% of total housing stock, a small improvement on the 1.3% at the end of 2012, but significantly short of the current 3.8% rate in the UK.”

Ms Tennent pointed out that, despite the improvement, property prices remain 46% below peak levels and negative equity remains a further constraint on potential sellers.

“In addition, completions continued to fall in 2013,” she said. “Thus the tight supply conditions in Dublin and the surrounding area, which was the main driver of price increases in 2013, remain intact and will underpin house price inflation in 2014.

“However, the supply shortage, deteriorating affordability as house prices rise, and a continued lack of credit will also act as restraints on activity.”

Graham Murray, head of residential with Savills Ireland, said the growth in residential property prices could be higher than reported. He said the increase in residential property prices is based on mortgage financed transactions.

“It does not include cash funded deals which represent a significant proportion of activity, particularly at the higher end of the market.”

Mr Murray said there is a “clear” supply and demand issue, particularly in Dublin.

“This is why we are seeing a rise in house prices,” he said.

“This is likely to continue until more new housing stock becomes available on the market. At the moment this is not happening for a number of reasons, such as planning barriers set down by some development authorities and the restricted availability of development finance.”