Surprise as index of house prices slows

The rate of increase of Dublin house prices has slowed down substantially in the first quarter of 1999, according to the latest figures from First Active bank.

The mortgage lender's House Price Index shows the rate of increase in the first quarter of 1999 was 1.7 per cent compared to a 10 per cent increase in the last quarter of 1998.

Mr Paul Reville, First Active's group operations director, said the slowdown was surprising but he was wary of regarding it as significant until more data came in during the year.

"It is hard to see what the reason is at this stage. It is a bit early to be regarding it as a trend," he said.

Evidence on the state of the housing market is confusing. Ms Marion Finnegan, an economist with the estate agents Sherry Fitzgerald, said yesterday that its barometer of the second-hand market, which would normally approximate with new house trends, showed an 8.7 per cent increase in prices in the first quarter.

This is contrary to leaked Department of the Environment figures suggesting that second-hand house prices have fallen by 2 per cent between January and March. Ms Finnegan said mortgage lenders' figures could have been skewed by the tendency of investors to move into the market in the new year, acquiring apartments and smaller houses, and thereby lowering the mortgage price average. Ms Finnegan added the Irish Permanent monthly index had not revealed any slowdown. "There is no indication to show that prices are not rising rapidly," she said.

First Active stated that residential investment properties showed a rise in prices of 9.8 per cent during the quarter: "This continues to reflect an increase in investor activity, which had declined immediately following the introduction of the Bacon Report a year ago." Mr Reville said the index also showed a decrease in prices for existing three-bedroomed houses of 12 per cent although this appeared to be a correction after the 23 per cent increase in this category in the fourth quarter of 1998.

"First Active has noted an increasing trend in first-time buyers seeking new three-bedroomed homes that incur no stamp duty and qualify for `first-time buyers' grants," the bank stated.

Prices in the rest of the country increased on average by 4.2 per cent over the three months, according to the index, while prices for apartments and existing four-bedroom houses rose by 2.3 per cent. Mr Reville added that, with interest rates falling, it was difficult to see any major slowdown in the market.