There was a notable finding in the latest report from Daft.ie on property prices, which gave an overall picture of easing price pressures across Ireland.
It was that figures from the property price register showed that transaction prices in the first five months of the year were 2.3 per cent down on a year earlier, with the bulk of this in recent months.
These are preliminary figures – not all transactions may yet be registered. But after years of seemingly endless and significant price rises, it is interesting.
A slowdown in house price inflation nationally is the main message from the report.
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Most of the data relates to the prices at which houses are listed for sale and growth here has slowed to 3.8 per cent from 6.8 per cent a year earlier.
In a commentary published with the report, Ronan Lyons, professor of economics at Trinity College Dublin, pointed to a “two-tier market”.
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Most of the slowdown in price growth is in the cities, particularly Dublin, where listing prices rose 3 per cent year on year, while in the other cities prices are pretty much flat.
Price inflation remains strong elsewhere, notably in Connacht/Ulster where it is 8.8 per cent.
Central Statistics Office (CSO) data, based on Revenue returns, has also showed an easing trend, though still estimates growth is stronger, with annual price growth of just over 6 per cent in April.
There are two separate sets of data in the Daft.ie report, measuring slightly different things.
The listings data shows the prices at which properties are being put up for sale. This is the main body of the Daft report, as it clearly has the figures itself here.
It shows a decline in the annual growth rate from 6.8 per cent to 3.8 per cent this year, a “considerable slowdown”.
The average list price nationwide for a three-bed semidetached house was €445,000, 44 per cent above pre-Covid levels.
The report also looks at transaction prices from the property price register – the prices at which homes were actually sold.
Here too there was a slowdown, with June prices nationwide just 0.6 per cent higher than March and 3.2 per cent up on one year earlier. The average transaction price for the three bed semi-d was €453,000.
The changing picture in the Dublin market is attributed by Daft to an increase in supply on the market.
While house supply remains below demand, a rise in apartment and new home supply does appear to be having an impact on prices. New home sales in Dublin in the year to March were up 3.7 per cent, though stasis in the second-hand market meant overall transaction levels edged only slightly higher.
While there is a traditional focus on new homes, in fact a lot more business is done in the second-hand market, even for new buyers.
Marian Finnegan, chief executive of Sherry FitzGerald estate agents, says new housing stock in Dublin has helped to stabilise prices. With new house commencement data reasonably strong and listing prices still being achieved in many areas of the second-hand market she believes it could be “more of the same” for the rest of the year.
New home supply in many regional areas – outside of the Dublin catchment area – remains very low and with the second-hand market also “stuck” price growth here is more rapid.
Supply levels are certainly an issue behind prices. But the market is also running into affordability buffers in some areas. The average three bed semi-d in Dublin, for example, costs €580,000, requiring an annual income of €130,000 from a first-time buyer. In south Dublin the price rises to close to €750,000 – and of course many houses are bigger and thus cost more.
This affordability issue appears to be reflected in two ways. At the top of the Dublin market, sales seem to be taking longer.
The cohort of high-income buyers may be shrinking a bit, too, due to the fallout in the tech sector, where job numbers are declining and high-value share option schemes are often less lucrative.
[ Home commencement levels fall to rate last recorded in 2020Opens in new window ]
Still, higher-priced properties in the more expensive Dublin 4 and 6 areas are still selling, according to Finnegan.
There is a more acute issue for first-time buyers, as new house prices in many areas of Dublin rise above the €500,000 level which qualifies for support under the Help-to-Buy scheme.
This offers a maximum €30,000 tax refund for first-time buyers of new homes. The same income limit applies in Dublin to the First Home Scheme, in which the State takes an equity stake. (Different county limits apply to this scheme).
Higher-priced developments aimed at high-income buyers – and movers – will continue to be built. And some apartment developments may still be affordable for first-time buyers, with signs of some more supply here “to buy” under Government schemes. But the old-style “starter” home in Dublin may be no more.
Many first-time buyers are thus being excluded from new schemes, according to John Fahy of Pangea Mortgages, removing one potential cohort of buyers.
Instead, as has been the case now for some years, newer buyers are being pushed to Dublin’s outer limits or into the commuter countries of Meath, Wicklow, Kildare and Louth – or even further afield – in a rerun of the Celtic Tiger exodus.
Fahy worries that the those buying these homes with the support of the Help-to-Buy and First Home schemes may find their properties worth a lot less than the list price when they come to sell.
A buyer with €350,000 in equity could buy a house worth about €100,000 more using the two schemes, but Fahy questions what it would be worth on the second-hand market where, unless the rules change, the next buyer will not have access to the same supports.
There has been political pressure to extend the Help-to-Buy scheme to second-hand homes, but previous ministers for finance have argued that a key goal of the scheme is to encourage new home supply and that a risk in extending the relief would be pushing up second-hand prices.
Availability of second -hand properties remains very low. As most transactions, even for first-time buyers, involve these properties, freeing up this market is important, as well – of course – as increasing new supply.
The two arguments are linked – more new homes would offer opportunities to those wishing to trade down, for example. But the current nature of the second-hand market, says Finnegan, leaves many house sales stuck in complex chains where one sale depends on another.
Bridging finance, which could help to free this up, is starting to become available again, but is limited and expensive enough. And the high price and lack of availability of rental properties means it is generally not an option for people to sell and then rent until they find a new place to buy. And so chains build up where one sale is reliant on others.
Lyons, in his commentary on the Daft report, raises another issue. It is that many homeowners are on fixed-rate mortgages taken out in the early 2020s – many of them taken out as fears rose of ECB rate rises after the Covid pandemic and Russia’s full-scale invasion of Ukraine in 2022.
[ Property prices fall in Dublin but are still ‘running hot’ in rural areasOpens in new window ]
For these borrowers, refinancing now to move would be at a more expensive rate. Lyons speculates that more may do so as their current fixed rate – typically for three to five years – runs out, meaning they will face higher repayments one way or the other.
Somewhat higher supply levels and affordability pressures suggest that, in Dublin anyway, the easing of price pressures may be a feature of 2026, while lower prices in some parts of the market remain possible. Whether the Dublin market has now topped out is a key question.
With forecasters such as the ESRI predicting steady if somewhat lower economic growth, demand in the market should hold up, providing some support to prices.
We have seen in the past the potential rollercoaster nature of the Irish housing market. But it would take an economic shock to send prices seriously into reverse.
