Growth in house prices shows some moderation

Prices for homes in Dublin and the commuter counties continued on a strong upward trajectory last month, although rising interest rates dampened overall growth in house prices.

The latest house price index published by Permanent TSB and the ESRI showed that the rate of increase in house prices recorded in September dropped to 0.7 per cent, representing a fall in the rate of growth for the fourth consecutive month.

Over the preceding 12 months, the total increase in national house prices now stands at 15 per cent. The average price of a house last month reached €308,179, more than €30,000 higher than the national average in December 2005. The average price paid by a first-time buyer hit €277,617.

Prices in Dublin rose by 1.7 per cent, with the average price coming in at €419,809 in September compared to €368,576 at the start of the year.

In the commuter counties of Louth, Meath, Wicklow and Kildare, house price growth was also strong, rising by 1.1 per cent, compared to 1.2 per cent in August, with the average house price in these counties reaching €341,736.

The average price of a second-hand home grew by 0.8 per cent last month, down from 1 per cent in August. This brings the total growth rate for the first nine months of the year to 9.4 per cent.

"The trend of slowing growth in national house prices has continued for the fourth straight month, following the recent series of ECB rate increases. For the first time this year there has been a reduction in the past 12- month growth rate," commented Niall O'Grady, head of marketing in Permanent TSB.

"Prices in certain areas, Dublin and its commuter counties in particular, continue to grow quite strongly. I expect this gradual slowdown to continue and price growth nationally to finish the year at 12 to 13 per cent."

Rossa White, an economist at Davy said yesterday that it has taken some time for higher interest rates to have an impact. "But the lagged effect on prices is similar to what was seen in the UK in 2004," she explained.

She added that anecdotal evidence suggests that sales of new homes remain firm, which indicates that demand is holding up.