State ‘not learning lesson’ from economic crash

The Government has been accused of “not learning their lesson from the property crash” after it emerged that house prices have risen almost 8% over the last year.

The latest Residential Property Price Index from the Central Statistics Office shows that, in the year to January, prices rose by 7.9%.

In Dublin, residential price rose 5.3% in the period — 4.9% for house prices and 9.1% for apartments.

Across the rest of the country, prices were 11.3% higher than January 2016 — house prices were up 11.2% and apartments by 15.7%.

The CSO said that, overall, the national index is 31.8% lower than its highest level in 2007 — with Dublin prices 32.4% lower than their February 2007 peak, with prices elsewhere down 36.6% from the May 2007 peak.

“From the trough in early 2013, prices nationally have increased by 49.6%,” said the CSO. “In the same period, Dublin residential property prices have increased 65.2% whilst residential property prices in the Rest of Ireland are 45.9% higher.”

Merrion economist Alan McQuaid said: “A lack of supply of houses has clearly pushed up prices, particularly in the Dublin area in the past few years, but it is not something that can be rectified overnight.

"Until this issue is addressed, prices in the capital and its outskirts will likely remain elevated, even with ‘Brexit’ related risks.”

He said the easing of mortgage lending restrictions, combined with the tax incentive scheme for first-time buyers, will keep upward pressure on prices until new supply comes on the market.

“The real question is whether we need this type of incentive at all, with politicians seemingly not learning their lesson from the property crash/financial crisis,” said Mr McQuaid.

“Taking all the factors into consideration, we see house price growth remaining in positive territory on a year-on-year basis for a while yet, with the annual rate of increase set to hold in the 6%-9% range over the next few months.”

Pat Davitt, the Institute of Professional Auctioneers & Valuers chief executive, said until the “appalling” lack of supply of residential homes is addressed, house prices will continue to rise.

He said supply is well short of the 25,000 to 30,000 units required annually, with new home completions in 2016 at about 12,000.

“While, for some years now, we have identified the issue of building and development costs as one that needs to be tackled to address the supply problem, a host of other organisations now agree, including the State’s own National Competitiveness Council, which acknowledges that significant concerns persist in relation to the cost of development and the cost of construction,” said Mr Davitt

He said the Government needs to fast-track the promised detailed analysis of building input costs.

“It appears that negative perceptions of the building industry may be informing policy in this area over knowledge,” he said. “Access to loans at reasonable interest rates is a major issue, particularly for SME builders.”

He said that, in the farming sector, the Strategic Banking Corporation of Ireland has introduced a special cashflow loan scheme for farmers at rates of 2.9%.

“A somewhat similar builders fund would allow the Government to agree new house prices with the participating builders, it would bring down the cost of new homes and it would also serve to taper the growing inflation in the price of second-hand homes,” said Mr Davitt.