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HOUSES PRICES ACROSS the country are rising more than €2,000 every single month on average, according to the latest House Price Report from Daft.ie.
On a national basis, the average price of a house is €240,000 – 11.7% higher than at this stage last year.
In the last three months alone, house prices have risen 4.3% across the country.
Report author, and Trinity College Dublin economist, Ronan Lyons said that strong demand and a relaxation of Central Bank rules on deposits was contributing to the surge in prices but the high cost of construction meant that supply was struggling to keep up.
Dublin leading the way
The average house price in Dublin is higher than the national average for the first time in two years, at 12.3%.
The average price of a house in the city centre has risen sharply since last year, up 18.2% to €299,635.
The lowest rise was in the west of the country, with prices are up 7% to €297,070.
Lyons said that Central Bank rules on minimum deposits “had taken the sting out of a potential housing bubble” in recent years, which meant that Dublin house prices had previously not risen at the same rate as the rest of the country.
This has changed now, however, with the relaxing on deposit rules meaning that the minimum requirement is now just 10%.
The economist said: “This means that first-time buyers buying expensive homes have seen the biggest reduction in the deposit required.
To give an example, someone buying a property in Dublin worth €250,000 has seen the required deposit fall by just over 10% (from €28,000 to €25,000). But someone buying a property worth €660,000 has seen their deposit requirement fall by 40% (from €110,000 to €66,000).
“Therefore, we would expect the change in the Central Bank rules to have the largest effects on the most expensive markets in the country,” he said.
Around Dublin’s neighbouring counties, prices are rising steadily, but further afield in Leinster, house prices are rising at a higher rate.
House prices in Carlow and Laois, for example, rose 18% and 16.9%, respectively in the past year.
But other cities also on the rise
Outside of Dublin, houses prices in other Irish cities are rising at a faster rate.
Galway is the most expensive city outside Dublin to buy, with the average house in the city costing €268,535. This was a rise of 13.4% on the same period last year.
The rises were even more pronounced in Limerick city and Waterford city, with house prices rising 15.1% and 14.5%, respectively.
On a county by county basis, it was Longford which recorded the biggest rise by percentage, with the average house in the county now costing €128,816, up 23.5%.
The trends seen outside of Dublin would suggest that the help to buy scheme brought in by the government in the last Budget is not having the desired effect, according to Lyons.
He said: “There have simply not been enough new homes sold in the first half of 2016 for this to explain such market-wide trends, however.
The Help-to-Buy scheme would have had opposite effect across cheaper and dearer markets. Its caps were such that its impact would be greatest in the cheaper segments of the market.
Lack of supply
While the number of properties being listed continues to rise, strong demand means that the total number of properties on the market continues to be too low, the report said.
On 1 June, there were 22,400 properties listed. This is 11% lower than the amount on the same day last year, and roughly two-thirds below the 2008 peak.
Lyons concludes his analysis by saying that supply will need to be increased, and that the high cost of construction is acting as a barrier to home building in this country.
He said: “The primary focus of policy efforts in the housing market over the last 18 months has been to further stimulate demand and prices. As I have written on a number of occasions in the last year, what we need is a focus on supply and quantities.”
The country needs 50,000 homes a year, Lyons added, and said that supply has not been meeting demand since 2011.
“The principal reason why so few homes are being built is the high cost of construction,” he added.
Combined with a strategy for using vacant homes, using land better and reform of housing subsidies, it is entirely possible for this country to have a healthy housing system.
You can read the full report here.
TheJournal.ie publisher Journal Media Ltd has some shareholders in common with Daft.ie.
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