Mortgage lending rules cool property price rises, says

Price growth strongest in cheaper parts of Dublin and for cheaper property types

In Dublin, where the housing squeeze is tightest, stock rose 25 per cent to 5,000 homes. Photograph: Dara Mac Dónaill

In Dublin, where the housing squeeze is tightest, stock rose 25 per cent to 5,000 homes. Photograph: Dara Mac Dónaill


Central Bank lending limits are cooling the rate at which house prices are rising, according to the second quarterly property report for 2018.

The median asking price for new homes nationally is now €270,000, while in Dublin it has reached €384, 000, according to the report, which is published on Monday.

Prices rose 7.2 per cent in the year to the end of the second quarter – the slowest rate of inflation in two years – and down from 9.5 per cent in the first three months of the year.

In Dublin, the slowdown was more marked, down to 6.8 per cent from 11 per cent at the turn of the year, the report shows.

The research attributes the cooling rate of inflation to slower bank lending. Its author, Davy economist Conall Mac Coille, welcomed the finding, arguing that double-digit inflation was unsustainable in the long term.

“The Celtic Tiger years demonstrated the folly of allowing rising leverage in the mortgage market to drive double-digit house price inflation indefinitely,” he said.

This time around, he said, Central Bank limits, which restrict lenders to loaning up to 3½ times a borrower’s income, were preventing households from forcing prices higher by taking on excessive mortgages.

“We would normally expect the slowdown in asking prices to feed through into transaction prices within the next three to six months,” Mr Mac Coille said.

He noted that prices were growing at their strongest in less expensive parts of Dublin and for cheaper property types.

“For example, one-bedroom apartments in Dublin are up 11.4 per cent on the year, but four-bedroom detached houses are only up 2.3 per cent,” he noted.

Acute shortage

He warned that the State still faced an acute housing shortage, but agreed that there was a more sensible debate on solving the problem that focused on planning reform, housing density, efficient use of State land and infrastructure.

Angela Keegan, managing director of, said stocks had improved. The number of available homes was up 3.7 per cent nationally on the year to 21,600, the first sign of growth since 2015.

In Dublin, where the housing squeeze is tightest, stock rose 25 per cent to 5,000 homes, which she described as very positive.

“With few homes now in negative equity, transactions among existing homeowners with mortgage debt are on the rise,” she said. “There are also now 409 new housing developments listed for sale on Myhome – well up from the 342 in mid-2017.”

Figures from the Property Price Register show that the number of sales in the first five months of 2018 rose 6 per cent and indicated that the increase for the year could be closer to 10 per cent. This would bring the number of sales to 60,000.

“While we are still clearly in the midst of a housing crisis, all the key indicators are moving in the right direction as we inch closer to a normally functioning property market,” Ms Keegan said.