House prices up more than 7% as supply constraints hit

Two new reports on the Irish housing market paint a picture of a sector under strain due to a lack of supply, with asking prices rising and a pressing need for the Government to stimulate homebuilding.

The two quarterly reports, one each from rival property websites MyHome.ie and Daft.ie, both suggest that asking prices nationally have risen so far this year at an annual rate of more than 7 per cent.

Myhome, which is owned by The Irish Times, produced its third-quarter report in conjunction with the stockbroking firm Davy. Conall Mac Coille, Davy's chief economist, said a "lack of supply is hurting transactions", with levels falling 5 per cent over the first eight months.

Myhome said that overall, house prices are on track for a gain of more than 5 per cent over the whole year, although a bulge in the market in summer has cooled somewhat. It said a buoyancy in asking prices earlier in the year is now being reflected in transaction prices.

It surveyed visitors to its site, and found that more than three quarters of them don't expect any change to the tight Central Bank lending rules that have constrained borrowing levels and made it difficult for some first-time buyers to get on the ladder in an era of low housebuilding.

More than 70 per cent of respondents to its survey expect big house price rises over the next 12 months, of up to 10 per cent.

Almost half of respondents to the survey would like to see budget measures to stimulate homebuilding, while only 11 per cent think the solution to the current pressure in the market should be to loosen lending limits.

This, said the site, shows there is “little underlying political pressure” for the Central Bank to relax its rules.

Average prices

Myhome found that average asking prices in Dublin, on the most recently added properties to its site, were €327,000, and €232,000 nationally. It suggested a quarterly rise of just 0.4 per cent nationally after a rise of more than 5 per cent in the summer months.

It said the number of houses for sale was down 2.6 per cent to just under 23,000.

“The contraction in residential transactions cannot be blamed on any lack of mortgage availability,” it said, highlighting that mortgage approvals were up a third in the three months to August.

Daft, meanwhile, said house asking prices had risen 7.6 per cent annually in the period to end of September, with a rate of inflation of 5.3 per cent in Dublin but much higher in cities outside the capital.

Asking prices are up 10 per cent in Cork city, 12 per cent in Galway, 14 per cent in Limerick, and 16 per cent in Waterford.

Ronan Lyons, the Trinity College economist who helped compile the Daft report, said the policy focus needs to shift to lowering the cost of construction and land in order to stimulate more building.

He said the current strains in the market were not as a result of the “failure” of the Central Bank rules, but rather were a reflection of the reasons why the rules were introduced in the first place.

Mr Mac Coille, meanwhile, said: “What has become clearer is that the lack of homebuilding is now holding back transactions in the housing market. It remains to be seen whether the new measures in Budget 2017 will break the logjam.”