Michael O’Connor, auctioneer and REA chairman, said the reason for the fall in Dublin prices was unusual, as lack of supply normally meant that the cost of homes would increase.
“There are buyers out there but a combination of Central Bank restrictions and the fact that rents are rising and making it harder for first-time buyers to save means the market is stalled at the moment.
“The second-time buyer is not moving, so we have a problem with supply.
“Also, banks are now only giving mortgage approval for three months which means that, unless you find a suitable property within that time period, you have to go through the process again.”
The average house in Dublin city and county now costs €332,000, down €21,500 (6.08%) on last December’s price, the Q4 REA Average House Price Survey has found.
And while prices in Dublin have been hit following large increases in 2014, values in the commuter counties and the larger cities have grown by 4.58% in the 12-month period, with the average house now costing €206,853.
The cities have had a strong fourth quarter, with Cork (up 3.64%), Galway (up 4.17%), Limerick (up 1.29%), and Waterford (up 2.84%) all turning in their best performances since the survey began in 2013.
The average semi-detached house nationally now costs €188,370, a slight rise on the Q3 figure of €186,102.
The REA survey concentrates on the sale price of Ireland’s typical stock home, the three-bed semi.
The lack of suitable supply is the biggest influence on the property market nationwide, according to Mr O’Connor.
“What we have seen in the last three months are prices only increasing in areas that are offering people the accommodation that they require,” he said.
“We are seeing a lack of supply of good quality three-bed semi-detached houses across the country, and a desperate need for new developments.
“In many areas, the properties available in the sub-€220,000 level are either too small, or need too much investment, to bring them up to standard.
“The market is still stalled at the second–time buyer level, due to the restrictive nature of the Central Bank’s deposit lending rules.
“There are very few suitable houses to buy at the lower end of the market for first-time buyers because potential second-time buyers have no way to trade upwards.
“While Dublin was the first region to recover, we are now seeing an increase in values in our largest cities outside Dublin a year later.
“For the first time, we are seeing developers trying to buy land in the anticipation of building as it is now economical to build in some of our larger cities.”