A ‘sustainable’ recovery or another bubble waiting to pop?
Analysis: Dublin house prices jumped 25% in last 12 months. Have we learned nothing?
Dublin house prices rose by 3.1 per cent in June and were 24.4 per cent higher year-on-year. Photograph: Alan Betson/The Irish Times
News that house prices in Dublin jumped by just under 25 per cent in the 12 months to the end of June is enough to put the fear of God into any rational-minded person.
While some sectors may cheer this “recovery”, if we have learned anything from the catastrophic crash which started in 2007, it should be that price shifts of this scale benefit no-one in the long run.
The chasm between those who own property and those who don’t is widening and at a terrifying rate. According to one figure published by estate agents Douglas Newman Good (DNG), home owners were better off by €220 a day over the three months from March to June.
DNG’s chief executive Keith Lowe said property prices in Ireland fell too far and too fast when the bubble burst and suggested it was inevitable prices in the greater Dublin area were going to rebound strongly.
“The fact that property prices in the capital have risen at a more realistic and sustainable level this quarter than that experienced in the first quarter of 2014 is to be welcomed,” he said.
Comments from estate agents - the body benefiting most from the current upheaval - should, however, come with a serious health warning.
Dublin house prices rose by 3.1 per cent in June and were 24.4 per cent higher year-on-year. Nationally, the year to the end of June saw prices increase by 12.5 per cent compared to an increase of 10.6 per cent in April and increase of just 1.2 per cent recorded in the 12 months to the end of June last year . There is nothing in these numbers which are “realistic and sustainable” despite what Mr Lowe may believe.
Apart from estate agents, home-owners would seem to be quids in this morning. While it is understandable that property owners - particularly those mired in negative equity - are buoyed by such price increases, first time buyers or people looking to trade up or those on housing waiting lists will be further demoralised by the news.
“It is really worrying,” says mortgage broker and financial analyst Karl Deeter. “When you see double digit price increases over a period of just six months it is not a good sign and points to serious problems in the system.”
“We now have rents rising and house prices rising at rates which are excessive and unless something is done we could be facing a double whammy of more people on housing lists and even more people in mortgage distress,” he warns.
The problems are easy to identify. There is a chronic shortage of supply of new properties, particularly in the Dublin area. Last year 8,300 new houses were built across the State when three times that number would ordinarily be built to meet demand.