The slowdown in the property market was confirmed yesterday as new figures revealed house prices remained flat in January. And the slowdown is beginning to be felt by the exchequer. Laura Slatteryand Marc Colemanreport.
House prices nationally grew by just 0.1 per cent in January, according to the latest house price index by the Permanent TSB/Economic and Social Research Institute (ESRI).
The annual rate of growth in house prices slowed to 10.6 per cent, down from 11.8 per cent the previous month. The average price paid for a house nationally is now €311,000.
Stamp duty receipts in January and February together amounted to €669 million, the Department of Finance announced yesterday.
Though ahead of generally conservative Government expectations for €602 million, the figure marks a significant slowdown.
Stamp duty receipts in the first two months of the year are running 22 per cent ahead of the same period last year. However, revenue from stamp duty jumped 36 per cent over the course of 2006.
Davy stockbrokers' economist Rossa White warned yesterday that the full impact of housing market trends had not yet been seen in Government finances.
"There is a significant lag of perhaps two months between the stamp and capital tax transactions involved and the recording of revenue," Mr White said.
"Although stamp duty and capital receipts are still well up year-on-year, that growth rate is slowing."
It is anticipated that the rate of growth in house prices will fall further as the year continues. Permanent TSB's head of marketing Niall O'Grady said the rate of price rises was now "very moderate".
House prices rose by just 2.6 per cent over the six months to the end of January.
The Republic's biggest bank, AIB, yesterday lowered its forecasts for house price inflation and housing completions in 2007, after separate data showed a weaker than expected level of housing registrations in February.
The lender now expects prices to rise by just 2-4 per cent on average this year and a spokesman said it could not rule out falls in the market in some months.
The bank also trimmed its projections for housing completions, which it now believes will fall to 82,500 this year, down from a peak of 93,419 in 2006.
Although prices are no longer escalating, it is expected that first-time buyers will struggle to afford property due to the rising trend in interest rates.
The European Central Bank (ECB) is expected to increase its base rate by a quarter percentage point to 3.75 per cent when its governing council meets next Thursday, and further rate hikes are likely later this year.
The ECB rate stood at just 2 per cent 15 months ago.
Apart from stamp duty, yesterday's exchequer returns showed the Government tax take in the first two months of 2007 was €8.25 billion, 12.8 per cent ahead of the €7.3 billion received in the same period of 2006.
That is down on the 16 per cent growth in tax revenue recorded last year. However, it is ahead of the Budget day expectations of a 10 per cent growth in tax revenues in the early part of the year.
If sustained, it will still be sufficient to provide the next government with significantly more revenue than expected at the time of the last Budget, though analysts suggested last night that there were a number of factors that could adversely affect the outcome.
The latest exchequer figures also show that compared to a Budget target of 13 per cent, day-to-day Government spending rose by 18 per cent in the year to February.