New rules on mortgage lending slowing house price growth
House prices grew by 1.6% last month, according to the latest figures from the CSO, though property prices remain a third lower than their peak in 2007.
The CSO said residential property prices increased 7.6% year-on-year to October 2015.
In Dublin, prices rose 1% in October and were 4.5% higher than in October 2014.
Property prices rose in the rest of the country by 2.1% in October, while prices were up 10.7% compared with October 2014.
Economists from Goodbody and Merrion stockbrokers cited the Central Bank rules when reacting to the CSO figures.
“These latest figures were much as expected and saw a continuation of the general downward annual trend of the past six months or so, which was temporarily interrupted in August,” said Alan McQuaid, economist at Merrion Stockbrokers.
“Meanwhile, prices were up 1.6% in the month following a rise of 1.3% in September. Still, this was a bit lower than the monthly increase of 2.9% posted in October 2014.
“A lack of supply of houses has clearly pushed up prices, particularly in the Dublin area in the past couple of years, but it is not something that can be rectified overnight. But, one would expect an improvement on this front over the next year or two, keeping prices down as a result.
“Still, the generally better economic backdrop, particularly in relation to the labour market, should see house price growth remaining in high single digits on a year-on-year basis for a while yet even with credit restrictions and increased planning permissions.”
Juliet Tennent, economist at Goodbody, said the new rules were having a greater impact in Dublin due to the higher property prices in the capital.
“In the capital, annual property price growth slowed to 4.5% year-on-year in October, from 6.5% year-on-year in September and 24.2% year-on-year a year ago,” said Ms Tennent.
She also said mortgage approvals are down 3% year-on-year to September.
“The short-term impact of the macro prudential rules is weighing on prices and activity as expected. The slowing in mortgage approvals in September indicates further weakness as the market continues to digest the rules.
“In the medium term, we expect the impact of the rules will wash through, and while they will act to curb excessive price growth, there has been no change to the supply demand dynamics, which remain supportive of higher house prices.”
