House price inflation is set to accelerate in 2017 to 8% driven by the economic recovery and an ever tightening housing market according to the latest house price survey from MyHome.ie in association with Davy.
However the report warns that the combined impact of the Help-to-Buy scheme and looser lending rules means that double-digit house price inflation is a distinct possibility in 2017.
The warning comes despite a subdued end to 2016 which saw the prices of newly listed properties on the MyHome website fall 2.2% on the quarter, in line with normal seasonal patterns. However prices nationally are up 5.5% year on year.
The author of the report, Conall MacCoille, Chief Economist at Davy, said robust jobs growth and the lack of supply, especially in Dublin, were already likely to deliver substantial house price gains this year. But he said public policy on two fronts will help to further stimulate house price inflation in 2017.
"The Help-to-Buy scheme – providing a tax rebate worth 5% of the purchase price of newly-built homes to first-time buyers – will add fuel to the fire. In the short term, the measure is likely to push up house prices, helping builders’ profit margins. However there is likely to be little material impact on housing supply as land prices quickly rise"
"Secondly the Central Bank of Ireland has relaxed its lending rules so that there are no restrictions on the availability of 90% loan-to-value (LTV) mortgages to first time buyers. While the immediate impact of the change is likely to be small, limited to Dublin and commuter belt counties which account for the bulk of transactions above the €220K threshold, the main impact may be on expectations. As the housing market tightens, first time buyers desperate to secure homes will be encouraged to take out the maximum 90% LTV loans"
While asking prices on new instructions – which provide the best leading indicator for actual transaction prices – fell by over 2% in Q4, bringing the mix adjusted asking price for new sales nationally to €227K - they are still up 5.5% year on year.
In Dublin the mix adjusted asking prices for a newly listed property remained unchanged at €328K, but this is still up 4.9% year on year.
According to MacCoille the price moves in Q4 were in line with expectations. "In previous years activity was artificially inflated by expiring tax reliefs or fears of a credit crunch ahead of the introduction of new Central Bank lending rules. This year no such distortion exists."
The Managing Director of MyHome.ie Angela Keegan said the number of properties listed for sale fell to a fresh low in Q4.
"In Q4 2016 there were just 20,875 properties listed for sale on the MyHome website – down 7.7% on last year. This means that just 1% of the Irish housing stock is currently listed for sale. The lack of liquidity is particularly acute in Dublin where there are just 3,619 properties listed for sale. This is down 20% on last year and means just 0.7% of Dublin’s housing stock of 535,000 properties is currently listed for sale."
"In this context buyers are becoming more desperate to secure properties. In Q4 the average time to sale agreed fell to a new low of four months across Ireland and to just three months in Dublin. The figures now suggest that the average house is sold just once every 50 years, whereas in the UK it’s half that" Keegan said.
Around the country
The median asking price of newly listed properties excluding Dublin is up 10% year on year at €185K.
In Cork prices were up 7.5% on the year to €215K while the increase in Cork City was even stronger at 9.5%, where the median is price now at €230K. Prices in Limerick were up over 10% to €149K, in Galway City they were up 8.6% to €220K while in Waterford they were up 6% to €159K.
In fact solid price gains were the order of the day across the provinces with only two counties recording falls in median asking prices for all property types – Cavan (-4.69%) and Tipperary (-1.67%).