Price of houses set to increase by 6%

THE price of houses is set to rise by 6% this year, according to a report by estate agents.

The forecast by members of the Irish Auctioneers and Valuers Institute contrasts with an Ulster Bank estimate of zero growth in prices made last week.

In a double blow for house hunters, the report found that as prices continue to rise, buyers will get less for their money.

It notes that three-bed semi-detached houses are on the wane in Dublin, being replaced by smaller two-bed duplexes, townhouses and apartments.

Only 200 detached houses will be built in Dublin this year, and average house sizes will be 800 sq ft, in contrast with the traditional 1,000 sq ft three-bed semi as the move towards higher density housing takes a grip.

Dubbing 2002 "a Lazarus year" as the residential market picked up again after a slight price slide in 2001, the survey said house prices nationally rose by 10% to 14%, and by up to 25% in select parts of Dublin, Cork and Galway. Removal of the First Time Buyers' grant just before Christmas won't have any impact on lowering house prices, said estate agents intending buyers had to hold onto contracts in the face of anticipated price increases through 2003. IAVI chief executive Alan Cooke said the return of confidence to the market was in no small measure due to the return of investors following budget changes, which restored mortgage interest relief and reduced some residential stamp duty rates, in order to boost supply in the private rented sector.

However, Mr Cooke said the principal factor driving the housing market continued to be the low interest rates.

The report also found that 60% of IAVI members felt the changes to Social and Affordable Housing provisions will increase the supply of new housing over the next two years. "This figure would undoubtedly have been higher had the changes been more builder-friendly than was first perceived," said Mr Cooke.

The pre-Christmas Budget 2003 changes on stamp duty for commercial property transactions will drive more cash out of the country, the IAVI's Irish Property Market survey warned. More than 1 billion went across the Irish Sea to commercial property investments in Britain.

Some 82% of IAVI members believe that Ireland's commercial property market has lost competitiveness as a result of the increases in commercial stamp duty rates.