House prices are flatlining across Republic, MyHome.ie report says

Income to house-price ratio declines for first time since 2012, to 6.8 times average salary

Mortgage lending to first-time buyers has increased by 15 per cent. File photograph: Cyril Byrne/The Irish Times

Mortgage lending to first-time buyers has increased by 15 per cent. File photograph: Cyril Byrne/The Irish Times

 

House prices are flatlining across the Republic as the banking regulator’s lending rules take the heat out of property inflation, a report from website MyHome.ie shows.

MyHome.ie’s report for the fourth quarter of 2019, published on Thursday, shows that the average selling price for a house in the Republic rose 0.72 per cent to €267,000 over last year. That figure was down 0.45 per cent from the previous three-month period.

Conall MacCoille, chief economist at stockbrokers Davy, the report’s author, noted that lending rules imposed by financial services regulator, the Central Bank, led to more realistic asking prices as they prevented first-time buyers from taking on excessive mortgages.

He pointed out that, at €292,000, the average house price was 6.8 times average income of €43,000 a year, slightly below the UK ratio of seven times earnings.

“This is the first time since 2012 that Ireland’s house price to income has declined,” he said.

Central Bank rules require that most home buyers can only borrow to up to 3.5 times their annual income. Lenders are allowed to break this limit for 20 per cent of first-time buyer mortgages and for 10 per cent of loans given to those trading up.

The Central Bank restated these rules last month despite pressure from builders, banks and Government.

In Dublin, average house prices were €374,000 in the final three months of last year, unchanged over 2019 and 0.5 per cent down on the previous quarter.

Excluding the capital, average house prices were €222,000, an increase of 1.4 per cent over the previous 12 months, but a dip of 0.5 per cent on the preceding quarter.

‘Sluggish price inflation’

Angela Keegan, managing director of MyHome.ie, which is owned by The Irish Times, welcomed the clarity emerging over lending rules and Brexit.

“For most of the year, we understandably saw prospective purchasers being reluctant to take the plunge due to these two unresolved issues, leading to sluggish price inflation,” she said. “The clarity we now have will likely lead to more settled price expectations and a stabilisation of residential transactions in 2020.”

While it remained to be seen how the Central Bank’s decision to leave mortgage rules unchanged, and Brexit would affect the market, she said, buyers could plan without fearing sudden shocks.

Mr MacCoille said the number of homes listed for sale fell 11 per cent in the last quarter of 2019, while instructions to put homes on the market dropped 13 per cent.

Nevertheless, he said there were positive signs from the market. “Mortgage lending to first-time buyers is up 15 per cent in the first three quarters and transaction volumes in the €300,000-€400,000 price range are up 7 per cent in the capital,” he said.

“It is also encouraging to see homebuilding completions rose above 20,000 for the first time in the 12 months to September and housing starts went above 26,000,” Mr MacCoille said.