INFOGRAPHIC: New rules cool housing market

Mortgage rules introduced by the Central Bank earlier this year are already affecting consumer sentiment and house prices, a report on the state of the property market claims.

Property website Daft.ie today published its House Price report for the second quarter of the year, and has found that both the growth in prices and expectations have dampened since it was announced that non-first time buyers would require a deposit of at least 20% of the value of the property.

The report states that the average asking price for a house in Ireland grew by 1.9% in the second quarter of the year.

However, while the average price has risen in all but one of the last seven quarters, the pace of growth has slowed from an average of 5% to less than 2%.

A survey of more than 1,000 property market participants found that expected house price growth peaked at 12% in the second half of last year — prior to the announcement of the rules.

Since then, however, those surveyed expected house prices to grow by just 3% outside Dublin.

Ronan Lyons, a Trinity College Dublin economist who authored the report, said that while growth had slowed in Dublin, demand has moved to commuter counties which have seen a 10% increase in prices in the last nine months.

“The second quarter of 2015 saw the last of those buying under the old mortgage rules and already the Central Bank regulations about borrowing are having a clear impact not only on overall house price growth but also on the spread of house prices,” said Prof Lyons.

“In each of the five most expensive markets in the country — Dublin 4, Dublin 6, Dublin 6W, Dublin 14, and South County Dublin — average prices currently are more or less unchanged from September 2014, when the Central Bank announced it would be capping mortgages.”

The average price of a house in the five largest cities in the country has risen from between 11% and 19% in the last year.

With an average asking price of €210,966, house prices in Cork City have seen the greatest annual increase of 18.9%; followed by Galway city (up 17.2% to an average price of €207,697); Dublin city centre (€249,337, up 12.3%); Limerick City (€133,593, up 11.4%); and Waterford City (€118,234, up 9.3%).

The new mortgage rules, which instruct that first-time buyers must have a 10% deposit saved for the first €220,000 value of a house and 20% of the value thereafter, are also influencing when buyers enter the market, according to Daft’s survey.

More than half of those asked who are not immediately buying a house cited the need to save for a deposit as the main reason that they have yet to buy, compared to a quarter of those asked midway through 2014.

The report also notes regional fluctuations in the rate of growth. In Munster, prices increased by at least 9.3% across the province with the exception of Kerry, Co Limerick, and Tipperary which recorded annual rises of 7% or less.