Warning to househunters as survey shows cooling of housing market

Househunters were today warned they face a tricky balancing act in getting on to the property ladder as a new house price survey showed signs of a slowdown, the first for five years.

Estate agents Douglas Newman Good revealed that rising interest rates were helping to create the much touted soft landing in the market, but at the same time creating added costs for first-time buyers.

Backing a separate study by umbrella group the Irish Auctioneers and Valuers Institute, DNG reported the rate of house price growth was on the way down – a trend not seen since 2001 when prices fell due to 9/11 and the technology bubble bursting.

The survey showed the average price of a second-hand house in Dublin rose by 7.4% between April and June this year – compared to a 10% rise in the first quarter of the year.

Paul Murgatroyd, DNG economist, said: “We do seem to be moving into a period of soft landing. The downturn, everything will be fine scenario we have been hearing about, it looks like it is coming to fruition.

“We are moving into a soft landing and stabilising of house price growth, but certainly there is no crash or big dip.

“The balances of power are shifting back to the buyer from the vendor slightly but the downside is that there is the double-edged sword of raising increased sums to fund the buying and paying back loans.”

Mr Murgatroyd also warned that first time buyers sat on their hands in 2001 expecting prices to keep on falling but in the first quarter of 2002 prices saw a 6.5% rise, making up all the ground that was lost in the previous year.

The IVAI said that the property market is finally beginning to cool and some homes are even seeing a drop in prices for the first time in more than a decade but they also dismissed any prospect of a crash.

The survey said that although house price inflation continues to run at unsustainable levels in the Dublin market, the rate of increase did ease back from the record level of 10% during the first three months of the year.

DNG said prices for second-hand houses in Dublin have risen by a massive 27.8% over the past 12 months, the highest rate of increase in the last 10 years.

The survey also showed the rate of increase in west Dublin, popular with first-time buyers, was 4.8%.

The upper end of the market remains the strongest sector with an average increase of 8.6% for properties worth €700,000 or more.

Keith Lowe, chief executive of Douglas Newman Good, said: “Looking at the remainder of the year, if interest rates continue to rise steadily, it is difficult to see house price inflation running at anything other than a very small amount as demand is pegged back by the higher cost of borrowing.

“What we have seen in recent weeks is a very gradual slowdown in the market and, given the level of house price inflation in the year to date, this is certainly no bad thing, particularly for first-time buyers.”

DNG noted that the average length of time to agree a sale on properties fell from 55 days in the first three months of the year to 50 days between April and June.

There has been a 25% increase in the number of homes offered for sale by auction compared to 2005 and a 43% increase in the number of homes sold for more than €1m.