House prices to rise by close to 10% this year, says economist

House prices are continuing to rise across the country and are predicted to rise at a modest rate until the end of the year.

According to the latest house price survey from MyHome.ie, the trend of moderate price growth from the first quarter of the year has continued into the second quarter with the national mix adjusted asking price rising by 1.7%, up 6.1% on the year.

In Dublin, the rate of increase was higher, at 2.3% on the quarter and 10.4% on the year.

According to the survey, the mix adjusted asking price for a house nationally now stands at €202,000, while in Dublin it’s €282,000.

In Cork, the average asking price for a three-bedroomed, semi-detached house is unchanged at €185,000, down some 45% from the peak. In Kerry, the asking price also remains unchanged at €125,000, down just under 50% from the peak.

For new constructions, the national mix adjusted figure was up 1.1%, while in Dublin the corresponding figure rose 0.8%. This is the smallest quarterly increase in asking prices in Dublin since late 2013.

According to the study, the more modest increase in new construction indicates price inflation will slow to 5% by the end of the year, while the survey also found that house supply was improving nationally, particularly in Dublin.

Chief economist at wealth managers Davy Group and author of the report Conall MacCoille said the data pointed to a likely modest increase in house prices for the rest of the year.

“New instructions give the best lead indicator on house prices and, while the outlook remains uncertain, we believe house prices look set to rise by close to 10% for the calendar year.

“However, as the figures for new instructions indicate, annual price inflation is likely to slow towards 5% by the end of the year. This is not a negative, given that wages have not kept pace with house prices, stretching affordability.”

With a general election on the horizon, Mr MacCoille urged the Government to avoid introducing any measures aimed at relaxing credit constraints and inappropriately stimulating demand even further.

“As the election approaches, it is probable that inappropriate recommendations, perhaps aping the UK’s ‘help-to-buy’ scheme, will come to the fore. These should be resisted at all costs.

The key to restoring a healthy Irish housing market is to implement sorely-needed measures to alleviate planning and other bottlenecks that are holding back housing supply,” he said.

Mr MacCoille said cash buyers still accounted for over 50% of transactions in the housing market.

“It will probably be the second half of the year before their impact becomes apparent. The combination of falling mortgage-interest rates and rising rents makes house purchase more attractive, but the fact we didn’t see the usual seasonal pick-up in mortgage approvals in April is noteworthy,” he said.

Managing Director of MyHome.ie Angela Keegan said the report found some evidence that the supply situation was beginning to improve.

“The total number of homes listed on the site rose by 9.4% between Q1 and Q2. The upward trend has been most marked in Dublin, where we now have 5,550 properties listed, up 18.6% from March,” she said.