House price index shows 15.5% rise

House prices are continuing to spiral, with a new property index showing that prices in the first five months of the year were, on average, 15.5 per cent higher than the same period last year. The Irish Permanent House Price Index shows house prices in Dublin have been rising twice as fast as those in other parts of the Republic and continue to accelerate. The index fails to register the immediate impact of Government measures following the Bacon report to alleviate pressures in the housing market, but should provide a comprehensive picture over the coming months.

Irish Permanent, which is the State's biggest mortgage-lender, has reported seeing some evidence of rebalancing in the residential property market over the past couple of months. Chief executive Mr Roy Douglas said fewer investors were arranging finance to fund residential property purchases. "The Bacon measures seem to be beginning to work. It is clear that investors have left the market to some extent, but it would be a brave man that would say investors have waved bye-bye to the property market", he said yesterday. The index indicates some evidence of a marginal deceleration in the rate of increase in house prices in the early months of 1998. But in June prices began to accelerate strongly again.

The index was commissioned by Irish Permanent and compiled by the Economic and Social Research Institute.

It shows that between January and May last, house prices in Dublin increased by 15 per cent, compared with a rise of 10.5 per cent in the same period last year. Outside the capital, residential property has also become more expensive, with prices up by 8.8 per cent this year, following a 5.2 per cent hike in the same period in 1997, but the rate of increase continues to be substantially lower than in the Dublin area.

The scale of the increase in prices has been consistently greater among second-hand property compared to new housing developments but that differential is narrowing. Between February 1996 and May 1998, the index records a rise of 44.5 per cent in second-hand property prices compared with the increase in new house prices over the same period of 38.7 per cent. In Dublin, the most expensive properties are in the south inner city, the southern and south-eastern suburbs, together with a stretch from the north inner suburbs of Drumcondra and Castleknock.

Residential properties in the cities and suburbs of Cork and Galway and in counties within commuting distance of Dublin also fall within this bracket. The cheapest properties are to be found in the south midlands region, including Tipperary, Laois and Offaly, and the north-west counties of Mayo, Roscommon, Leitrim and Sligo, according to the index.

The index is based on the prices paid for residential property nationwide and recorded on the date of settlement. This generally means it is subject to a time lag of up to six weeks. It will be updated on a monthly and quarterly basis.