Annual house price inflation slows to under 10% in Dublin

House price inflation in Dublin has slowed to under 10 per cent for the first time in two years as new lending restrictions appear to be cooling the market.

The latest official figures show prices nationally rose by 0.9 per cent in July and were 9.4 per cent higher than a year ago.

In Dublin, where pressure on supply is strongest, values increased by 0.7 per cent and were up 9 per cent year-on-year, compared to over 20 per cent in April.

This is the first time since the middle of 2013 that prices in Dublin have risen by less than 10 per cent year-on-year.

The figures also show that prices outside the capital are now rising faster than those in Dublin on an annual basis.

Property price inflation has moderated since the Central Bank intervened in the market by introducing lending curbs in January.

Most experts believe, however, that prices will remain on an upward curve due to demographic pressures, rising employment and lower taxes.

The latest figures, collated by the Central Statistics Office (CSO), indicate Dublin house prices rose by 0.6 per cent in July while apartment prices rose by 2.7 per cent.

However, the CSO warned the sub-indices for apartments were subject to a high degree of volatility due to the low volume of trades.

Outside of the capital, residential prices rose by 1.2 per cent and were up 9.6 per cent compared with July 2014.

Despite the rises, residential property prices nationally are still 36.9 per cent lower than their peak level in 2007.

Dublin house prices, meanwhile, were 36.3 per cent lower than their peak, while Dublin apartment prices were 40.6 per cent off their peak values.

Investec economist Philip O’Sullivan said: “Our view has been (and remains) that the path of least resistance for residential prices in Ireland is firmly tilted to the upside, given the delta between new household formation - the most conservative estimates we’ve seen have this at 19, 000 per annum - and completions - 11,000 in 2014 - while in the background, rising employment and earnings and falling mortgage interest rates are stoking demand higher.”

Davy analyst Cathal MacCoille said the price rise in July suggested the housing market was a little stronger than some had feared, predicting the market would see inflation slow to 5 per cent by the end of the year.

KBC Bank said property price growth was easing to a more sustainable rate. It also noted that the faster pace of growth outside Dublin suggested recovery was becoming more broadly based.

“With employment increasing strongly and after-tax incomes also set to move onto a notably healthier trajectory, we see residential property prices rising by about 5-6 per cent in 2016,” the lender said.