Dublin house price fall is first in two years

House prices in Dublin fell for the first time in almost two years in September as further evidence emerged of a nationwide slow down in the housing market.

The average price of a house in Dublin fell 0.6 per cent to €296,454 last month, the first fall recorded since October 2001, according to the latest Permanent TSB House Price Index.

The September index shows that the rate of increase in house prices outside the Dublin area is also moderating, rising 0.7 per cent last month. In August prices increased by 0.8 per cent.

Mr Niall O'Grady, general manager of marketing with Permanent TSB, said the housing market was heading towards a soft landing and there was little risk of a collapse in house prices.

Earlier this year, the Economist magazine predicted a crash in the Irish housing market, warning that prices could fall up to 20 per cent in the next four years.

However, Mr O'Grady said low interest rates and demographic growth in the Republic should support the market, which was moving towards the soft landing that was predicted a year ago.

The index, compiled in association with the Economic and Social Research Institute, shows the average price of a house in the Republic rose 0.5 per cent to €225,351, continuing a recent trend towards moderating prices.

In July and August, the rate of increase recorded each month was 1.1 per cent and 0.8 per cent respectively. The monthly growth rate for September 2002 was 1.5 per cent.

On an annual basis, prices rose 13.8 per cent in the year to the end of September, down from the 15 per cent increase registered in the year to the end of August.

This is the lowest annual price increase figure recorded by the index since April 2003, when house prices grew 12.7 per cent.

Mr O'Grady said the strong increase in prices seen in the first half of 2003 had not continued into the second half of the year.

"Our expectations are that, over the year as a whole, the rate of increase in prices nationally will be in the order of 10 to 11 per cent - still significant but nowhere near as high as some commentators had feared earlier this year."

House prices for first-time buyers increased by 0.9 per cent in September, while prices rose by 0.2 per cent for second-time buyers. In August, the respective changes for both groups were 0 per cent and 1.7 per cent.

Meanwhile, the cost of a new house increased by 1.8 per cent in September, while second-hand prices rose by just 0.1 per cent.

Permanent TSB said this was probably due to the growth of house prices outside the Dublin area, where most of the new homes are currently being built.

The average price paid for a new house in September 2003 was €220,889, while that paid for a second-hand house was €231,671.