House price rises begin to slow

Last year was the best for price growth since the onset of the recession in 2007, survey shows

Last year was the best year for house price growth since 2007 and 2015 will see further price increases although at more modest levels, according to the latest house price survey from MyHome.ie.

The study shows that the price of homes fell in five counties in the last three months of 2014, mirroring a similar survey released on Monday by Daft.ie.

Caroline Kelleher, from DKM economic consultants, said that there was strong price growth in 2014, with the national mix adjusted asking price rising by 2.6% to stand at €194,000.

However, despite strong transaction activity, uncertainty over a number of new developments in the market is likely to dampen the rate of price increase in the coming year.

Ms Kelleher said: “The Central Bank’s new guidelines on mortgage lending which are expected to introduce a loan to value limit of 80% for new lending along with separate proposals to restrict any residential mortgage to 3.5 times gross annual income have the potential to limit the rate of price increases seen in recent times.

“However, there is some uncertainty over whether or not these will be implemented as originally outlined. In addition, the relief on capital gains tax introduced in 2011 to incentivise the purchase of property has terminated and this is likely to stem the rate of investment in buy-to-let properties in 2015.”

Ms Kelleher said changes to building regulations were adding to the cost of construction and could potentially limit new supply.

“This would suggest that any impediments to developing new residential units should be reviewed to ensure a more sustainable level of new house building.”

Her comments were supported by the latest figures which show a slight moderation in the rate of increase. In Q4 (the last three months of 2014) the mix adjusted average asking price nationally grew by 0.6% — down from 1.4% in Q3 — while the corresponding increase in Dublin was 2.2% — down from 3% in Q3.

Angela Keegan, managing director of MyHome.ie, said the substantial rise in transactions during 2014 was welcome, as was the price growth recorded for three and four-bed semis in most counties.

“The Property Price Register indicates that in the year to September over 27,000 transactions had taken place,” she said.

“Based on current trends total transactions in 2014 look set to hit the 40,000 mark, an increase of 38% on the 29,000 recorded in 2013. This is very heartening and, while still short of the level required for a properly functioning property market, it shows the recovery is gaining ground. The fact that the price of three-bed semis rose in 13 counties and remained unchanged in a further eight counties provides further evidence that prices are stabilising and the property recovery is spreading from urban areas.

“While consumer confidence is clearly returning it’s also clear that supply issues need to be addressed as a matter of urgency in several regions, especially in Dublin, Cork and Galway.”