Minister finds rise in house prices 'a bit of a surprise'

Banks and building societies were yesterday urged by the Minister of State with responsibility for housing to be cautious with their lending policies.

The average price of a new house in the first quarter of this year was 12.6 per cent higher than in the same period last year, according to the latest housing statistics bulletin from the Department of the Environment. The price was 16 per cent higher in the Dublin area for the same period.

Buyers of second-hand houses saw an even bigger increase. The average price rose by 14.2 per cent nationally, and 17.6 per cent in Dublin.

Mr Noel Ahern, Minister of State with responsibility for housing, said this was surprising, as banks and various analysts had predicted a "soft landing" for house prices.

"They were suggesting that the house market was getting into order and that supply was meeting demand," he said.

However, in the first three months of 2003, average prices for new houses increased by 3.4 per cent nationally, and by 4.3 per cent in Dublin, compared to the previous quarter.

Mr Ahern said there was a feeling that "money was never cheaper" and that banks were flush with cash. Because of this, people might be tempted to get into the property market earlier than they had planned. However, they might be borrowing beyond their capabilities and might not be able to meet their repayments later on, he said.

Mr Ahern called on the banks and building societies to exercise caution in their lending policies and to follow the guidelines in granting mortgages.

He said it was "a bit of a surprise" that house prices continued to rise in this fashion, given the dramatic increase in the number of new houses being built in recent years: "58,000 houses were built last year and this was the eighth consecutive record year of housing output. In 1993, only 21,000 houses were built."

This State was building houses at the fastest rate in Europe per head of population, he said.

"With State land now available, further supply is possible. This is good news for affordable housing as it removes the high cost of land out of house prices," Mr Ahern said.

However, Sinn Féin claimed that the Minister was "in denial" over the continuing rise in house prices. Mr Arthur Morgan, Sinn Féin spokesman on housing, said houses were increasingly unaffordable for people on medium incomes.

"In many instances, owning your own home is no longer an option - yet the Government refuses to intervene to resolve this crisis," he said.

"The junior minister's assertion that State land is now available is very deceiving. Very little State land is being made available for social and affordable housing. Very few people will be housed under the recently announced scheme - possibly 500 units of housing - but there are over 50,000 on local authority waiting lists alone."