The price of luxury homes in Dublin has fallen for the first time since 2013, as uncertainty around Brexit combined with an easing of pent-up demand saw property valuations actually fall in the year to September 2018.
According to the Knight Frank Prime Global Cities Index, prices in the capital fell by 1.7 per cent in the 12 months to September. The index tracks the movement in the top 5 per cent of the market or properties priced at €950,000 or more in Dublin.
This moves Dublin into 37th place, having been 16th a year earlier with price growth of 11.6 per cent.
The rate of decline was even faster in the six months to the end of September, with prices falling by 2.7 per cent.
John Ring, head of research with Knight Frank, said this was the first decline on an annual basis reported in the survey since the first quarter of 2013, and was being driven in part by uncertainty around Brexit.
“There is definitely a cageiness, and a wait-and-see approach there,” he said, adding that the UK’s imminent departure from the European Union was weighing on sentiment, while the weakening of sterling had resulted in less investment at the top end of the market from the UK.
Mr Ring said that while pent-up demand had driven strong price growth in luxury homes in recent years, much of this has now been sated, leading to a decline in activity.
“Expectations are being adjusted and it is definitely a slow market,” he said, adding that he expects the slowdown to continue into Q4, with what shape Brexit takes determining the performance of this market next year.
However, Mr Ring cautions against reading too much into the decline at the top end, noting that the factors governing the price of luxury homes, where the land values are proportionally much greater, are different to the first time buyer category.
Lack of supply remains a major issue among this cohort, and Knight Frank is forecasting property price growth on a national basis of about 8 to 10 per cent for this year.
Last month, global ratings agency S&P said that the Irish market was headed for a “soft landing”, but predicted three further years of growth until supply catches up with demand around 2021.
Across the 43 cities tracked in the index, the price of a luxury property increased by 2.7 per cent on average - the weakest performance in annual terms for almost six years. “A combination of uncertainty surrounding Brexit, rising interest rates across major economies, a tighter regulatory environment and the remnants of high supply in some markets is impinging on price growth,” the report said.
Singapore leads the index with prime prices up 13 per cent over the 12-month period, driven by the limited availability of properties and a strong market outlook in the first half of 2018.
While some European cities are still performing strongly - Edinburgh increased by 10.6 per cent and Madrid by 10.1 per cent, others have swapped spectacular for steady growth - Berlin rose by 5.4 per cent and Paris by 5.6 per cent.
In London, prime prices dipped 2.9 per cent over the year as uncertainty around Brexit continued. “This trend has been exacerbated by a growth in supply as more landlords attempted to sell their property following tax changes,” the report said.