Low interest rates and high rental levels are defeating the Bacon Report's objective to reduce investment interest in the housing market, according to new figures.
Irish Permanent has reported a significant rise in investor mortgages and a further decline in the proportion of first-time buyers taking out loans to purchase property.
While some measures introduced as a result of last April's Bacon Report appear to be stabilising the rate of growth in house prices, investor interest has been rekindled because of the favourable financial environment.
Dublin house prices rose by more than one third in 1998, according to the State's largest home loan provider, though most of the growth occurred in the first half of the year. Growth in Dublin in December slowed to 0.2 per cent, from 1.6 per cent in November.
The bank's latest quarterly survey of mortgage data found investors accounted for more than one fifth of mortgage applications in Dublin, similar to the period immediately prior to the Bacon Report. House prices in the rest of the State grew by 25.8 per cent in 1998, 10 percentage points less than the Dublin figure. In December, house growth rates outside the capital slowed to 0.5 per cent, from 2.9 per cent in November.
House prices increased by almost 30 per cent across the board in 1998. The average price of a new home in December was £99,352 (€126,151). Second-hand homes rose by 32.4 per cent, compared to a 25.7 per cent increase in new homes. But investor activity, at 12.5 per cent of all mortgage applications in December, is close to the pre-Bacon, March 1998, high of 12.6 per cent.
An Irish Permanent spokesman, Mr Diarmuid Bradley, said there was evidence the Bacon measures, which removed tax incentives for investors, were succeeding in stabilising house price growth.
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/VR3765MFOBH2NMV2QNICYDF67M.png)