Irish house price inflation cools for first time in nearly two years

House price inflation has slowed for the first time in almost two years, a sign perhaps that the current cost-of-living squeeze may be dampening demand. According to the latest residential property price index, property prices nationally rose by 14.2 per cent over the year to April, down from a rate of 15.1 per cent in March.

In Dublin, residential prices saw an increase of 11.5 per cent, down from 12.7 per cent in March, while property prices outside Dublin were 16.4 per cent higher year on year.

The latest data also show property transactions fell by 12 per cent to 3,138 in April, another sign of cooling in the market, while the total value of transactions for April amounted to €1.1 billion.

Before April, price growth in the State’s property market had risen almost continually since the start of the pandemic, fuelled by factors such as increased savings, remote working and lower-than-anticipated supply. However, cost-of-living issues combined with the prospect of higher interest rates - the European Central Bank signalled earlier this month that it would begin raising rates next month - are expected to see a significant moderation in price growth.

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The Central Statistics Office said Dublin property prices were now 10.2 per cent lower than their February 2007 peak, while residential property prices in the rest of the State were 3.2 per cent lower than their May 2007 peak.

The latest figures show the average price paid for a home in the Republic in the 12 months to April was €334,722. The average price paid in Dublin (€512,502) was the highest in any region or county. Dún Laoghaire-Rathdown had the highest mean price in the Dublin region at €713,514, while South Dublin had the lowest at €407,734.

The Border region was the least expensive region in the year to April 2022, with a mean price of €176,488. Longford (in the Midland region) was the least expensive county, with a mean price of €151,558.

“While price growth remains much higher than before the pandemic, we are now comfortable stating that house price inflation has surpassed the peak in the cycle,” Goodbody Stockbrokers said. “The rising cost of living and higher mortgage rates suggest further slowing is due in the coming months. Supply shortages however remain acute, limiting the extent of weaker price dynamics over the coming quarters despite rising domestic and international risks,” it added.

KBC Bank Ireland economist Austin Hughes said: “Monthly house price movements can be choppy but the April data hint that we may be seeing the start of a move towards a material slowdown in Irish house price inflation.”

Mr Hughes, however, noted that the average price paid for home nationally in April (just under €335,000) was 7.4 times average earnings (€45,000).

The chairman of the Association of Irish Mortgage Advisors Trevor Grant said prospective homeowners are understandably concerned that property values could drop in the near future, “but that doesn’t seem likely considering that demand continues to outstrip supply.”

“Supply is steadily increasing which should ease property price growth, but on the other hand the increasing cost of raw materials as well as growing labour costs may continue to add to the upward price pressures,” he said.

“Prospective homebuyers are looking to know whether they should move now or wait it out, in the hope that prices might soften. No-one can say with any degree of certainty what’s going to happen to prices, but there definitely appears to be scope for further increases, so if you’re in a position to buy now – and particularly, if you’re currently renting, then it might best to push ahead with your plans,” he said.