Upward trend in price of houses loses pace

New house prices continue to rise substantially faster than the value of existing homes, according to the latest Permanent TSB house price index.

The monthly survey showed prices overall slowing in January to a growth rate of 0.5 per cent. That is a significant drop on the rate in recent months, which has averaged 1.3 per cent. Last January, house prices rose 0.8 per cent nationally.

However, the price of new homes is growing five times faster than those of existing properties being sold on, according to the study carried out in association with the Economic and Social Research Institute (ESRI). In January, new home values rose by 1 per cent, compared to 0.2 per cent for other properties.

On an annual basis, homes were 13.4 per cent more expensive in January than in the same month in 2003.

That is down slightly on the 13.7 per cent annual rate in December. The trend in house prices has been declining since last July when the average annual increase nationally was 15.6 per cent.

A spokesman for Permanent TSB said the monthly growth figure was in line with its forecasts of a moderation in the annual growth rate this year to 6-8 per cent.

"The moderation in the rate of growth in national prices is very welcome," said Mr Niall O'Grady, head of marketing with Permanent TSB.

But he acknowledged the position for first-time buyers who tend to acquire newly- built homes was still difficult.

"The relative strength of prices for new houses will be of some disappointment to those who had anticipated that the record number of new houses built last year would see a more significant easing of the rate of growth in this sector," he said.

"That doesn't appear to have been the case so far and there must be continued pressure to ensure no let up in the house-building rate for the current year."

His comments reflect those of Mr Barry O'Connor, chief executive of housebuilder McInerney, who said a large part of last year's output was accounted for by student accommodation, holiday homes and special tax-designation units.

The average price of a house has risen to €235,156 nationally, according to the Permanent TSB index, up nearly €30,000 on the €207,454 figure in the same month last year.

In Dublin, the average price reached €308,214, more than €100,000 higher than the €205,364 average elsewhere in the State.

Prices rose faster outside Dublin, with the difference widening from the previous month. Dublin homes were 0.3 per cent dearer, while prices in the rest of the country increased by 0.8 per cent.

In a turnaround from the previous month, first-time buyers saw the cost of a new home jumping by 1.1 per cent, compared to an increase of just 0.2 per cent for second-time buyers. In December, the figures were 1 and 1.5 per cent respectively.