Rate of house price increase slowing down

The rate at which house prices are increasing slowed in the first seven months of the year and is expected to continue to moderate, according to a new survey.

Figures published yesterday by the Irish Permanent, the State's biggest mortgage lender, show that in July house prices were 9.6 per cent on average above their level at the start of the year, compared to an 18.3 per cent rise for the same period last year.

Over the last 12 months to July prices have risen by 20.2 per cent, reduced from a 22.6 per cent rise in the year to June.

Although prices in July increased by 2.1 per cent compared to 1.3 per cent for June this was below the increase in the comparable month last year Irish Permanent economist, Ms Jane Kelly, does not believe this signals increasing price growth for the rest of the year.

Ms Kelly said 1998 was probably the peak for price growth and that the annual growth rate had been slowing down since December last year.

She said measures introduced to increase supply may have caused house prices to approach a ceiling level.

Last week a study by Sherry FitzGerald estate agents forecast a 25 per cent rise in house prices in 1999, but the Irish Permanent index, compiled with the assistance of the Economic and Social Research Institute, indicated a more moderate trend.

The Irish Permanent index, published yesterday, showed price rises moderating more in Dublin than elsewhere. In the first seven months of the year price growth in the capital slowed to 11.5 per cent from 24.7 per cent in the same period last year. Outside Dublin, price growth fell to 9.4 per cent from 15.2 per cent.

Prices paid by first-time buyers increased faster than those paid by second-time buyers for the second month in a row. However, the annual figure for first-time buyers of 20.2 per cent is very similar to the 20.8 per cent for second-hand homes. In July the average price paid by a first-time buyer was £91,213 while the average price paid for a new home was £106,570.