House prices rise at lowest level in two years amid 'dysfunctional' market

Brokers Ireland director of financial services Rachel McGovern said: “Just a year ago a home buyer could have got a 10- or 20-year fixed mortgage for around the 3% mark. This is now well gone and will be looked upon as a missed opportunity by many." File picture: Colin Keegan, Collins

Property price inflation is at its lowest level in two years, but the market remains “dysfunctional” for first-time buyers.

The Central Statistics Office’s Property Price Index for April shows that home prices increased by 3.6% in the previous 12 months, rising 1% in Dublin and by 5.6% outside the capital.

However, it follows three consecutive months of house prices dropping slightly in the country with the median price of a home in Ireland now costing €313,000.

The current property prices are 1.7% above their Celtic Tiger peak in April 2007, and more than double the low reached in early 2013 (up 126.7% since then).

House prices are rising fastest in the midlands, mid-east and south-west of the country, which includes Cork and Kerry. Houses in Dublin city, meanwhile, are down 2.5% in the last year after a period of huge growth in home prices coming out of the pandemic.

The national Residential Property Price Index increased by 3.6% in the 12 months to April 2023https://t.co/SU51Q2gWkh#CSOIreland #Ireland #NewDwellings #PropertyPrices #HousePrices #IrishBusiness #BusinessStatistics #BusinessNews pic.twitter.com/mtM1WISfzw

— Central Statistics Office Ireland (@CSOIreland) June 14, 2023

The Institute of Professional Auctioneers and Valuers (IPAV) said the increase is “unsurprising” given what their agents are reporting around the country.

Chief executive Pat Davitt said: “Prices tend to ebb and flow with nothing dramatic happening, and this is not unusual. They are now moving up again with the shortage of supply keeping prices elevated.

There is still a high proportion of buyers purchasing without a mortgage, possibly up to 40%, and of course, the bank of Mum and Dad is extremely active.

“Unfortunately, this market does nothing for those without such resources. A market that doesn’t serve the needs of broad swathes of our population, particularly first-time buyers, is dysfunctional.” 

Brokers Ireland director of financial services Rachel McGovern, meanwhile, said that demand remains strong in the market despite rising interest rates. But it is prospective homeowners on average wages who will feel the impact of these rising interest rates the most, according to Ms McGovern.

"Many of these would previously have qualified for a mortgage but simply cannot afford the much higher repayments or indeed can no longer meet the tightening criteria imposed by banks,” she said.

Just a year ago a home buyer could have got a 10- or 20-year fixed mortgage for around the 3% mark. This is now well gone and will be looked upon as a missed opportunity by many.

“Unfortunately, while the majority of those taking out mortgages opted for fixed rates they tended to fix for much shorter periods, generally around three years. They will now be coming out to face much higher interest rates.” 

Elsewhere in the CSO figures, inflation in the price of new homes continues to grow apace, up 11.1% in the first three months of this year compared to the same period in 2022. Second-hand homes are still rising in price, but at a lower rate, up 3.5% on the same period in 2022.

The volume of homes changing hands, however, fell in April 2023 compared to the same month in 2022 by 5.3%. One in five homes bought in April (19.1%) were new homes, up from 13.1% in 2022. One in three buyers were first-time buyers, while one in eight were non-owner occupiers such as funds or for social housing.

The area with the highest median price of a home sold in April 2023 was Dun Laoghaire-Rathdown at €634,998. The cheapest place to buy was Longford, with a price of €160,000.