Not everyone will be happy with the news house prices are on the rise, writes Fiachra Ó Cionnaith
REPORTS this week of the first year-on-year property price rise in Ireland since Jan 2008 was greeted as a sign that a key part of our economic collapse is finally stabilising.
After half a decade of severe negative equity for many who bought a house or apartment during the boom years, the CSO announced on Tuesday that house prices rose by 1.2% between Jun 2012 and Jun 2013.
The increase was most pronounced in Dublin, which saw an increase of 4.2% compared with 12 months earlier, and 1.7% in Jun 2013 alone, while prices outside the capital are marginally higher than they were last year.
Understandably, the news — which is a world away from the 14.4% property price fall between Jun 2011 and Jun 2012 — has been welcomed by homeowners, particularly the one in three living in negative equity.
On radio, TV, newspapers, and online, it was greeted by the verbal equivalent of ticker tape parades, homeowner high fives, and hopes the economic crisis is coming to an end.
But while the relief among those who bought homes is understandable, there is another side to the story.
Since the economic crash took hold, a large percentage of the population has shunned buying property — both for cost and market vulnerability issues — in favour of renting.
This has led to a supply-and-demand issue in certain parts of the country, most clearly in Dublin as trends are more apparent in the largest population base, resulting in a rise in monthly rent prices as landlords know they have a trapped market — particularly when it comes to family homes.
As such, while the first house price rise in five years is good news for homeowners living in debt, a stabilising property market also means bad news for people who are yet to buy a home — or who feel, even with the significant reductions in recent years, the value in buying is still not there.
In reality, while we all love a good news story, telling the story of rising house prices simply from the perspective of homeowners ignores the equally valid story of a potential rental bubble looming over another section of society.
If you are in doubt about the situation perennial renters face, ask some of those trying to find a place to live right now.
Since the rental market bottomed out in late 2009, monthly prices have slowly started to creep up across the country, particularly in more sought-after areas. The latest figures from the Private Residential Tenancies Board show that between Mar 2012 and March this year, average prices rose by 2.3% in Dublin, 2% nationally, and 0.8% outside of the capital.
Since the end of 2011, rents have repeatedly increased in Dublin, while the past nine months has seen a similar situation occur outside the city.
It is important to remember that these increases are average rises.
In some of the more popular areas, there is anecdotal evidence of house rental prices rising by between €100 and €150 a month in the past year.
An article on broadsheet.ie raised this exact issue last year by reporting on a large crowd of mainly 20-somethings who came to view a small terrace house in Dublin city centre.
The price had hit €1,400. The home, in the opinion of most viewers, left something to be desired. Yet there was a rush to see it, regardless of the fact many felt they were not getting value for money.
Those commenting online reported similar situations in Portmarnock and nearby Portobello. But they said it was something people renting couldn’t avoid while the cost of buying property remained high.
The easy answer for renters is that, on paper at least, buying a house is now a good deal.
Homes cost an average of €448,261 in Dublin and €332,149 nationally during the boom, but are now 55% and 50% of those totals.
But for those either still unable to afford such prices, or who remain reluctant — for whatever reason — to buy, this week’s reports of a stabilisation in the property market is far from good news.
For this significant percentage of the population, whose story is rarely told when it comes to the property crash, there appear to be just two options: Put up with over-the-top rent or go into debt to buy a home — something that, as recent history shows, is hardly in anyone’s best interests.
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