House price growth slows again as cost-of-living issues bite

House price inflation slowed for the second consecutive month in May amid signs the market may be cooling in the face of higher living costs.

The latest residential property price index indicated that property prices nationally rose by 14.4 per cent over the year to May, down fractionally from a rate of 14.5 per cent in April. Headline inflation had been over 15 per cent.

In Dublin, residential prices saw an increase of 11.7 per cent, while property prices outside Dublin were 16.6 per cent higher year on year.

The latest data shows property transactions rose by 8 per cent to 3,731 in May and were worth a total of €1.3 billion.

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Price growth in the State’s property market had been on a steep upward trajectory 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 last month that it would begin raising rates later this month — are expected to trigger a significant cooling of the market.

The latest figures show property prices nationally have increased by 120.5 per cent from their trough in early 2013. Dublin residential property prices have risen 124.7 per cent from their February 2012 low,

They also indicate that homebuyers here paid a mean or average price of €337,288 for a dwelling in the 12 months to May.

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The mean price in Dublin (€513,468) was the highest in any region or county. Dún Laoghaire-Rathdown had the highest mean price in the Dublin region at €712,761. Outside of Dublin, the Mideast was the most expensive region, with a mean price of €348,794. The Border region was the least expensive with an average price of €177,773. Longford (in the Midland region) was the least expensive county, with a mean price of €152,720.

“The constant wave of house price increases is weighing heavily on house-hunters. Though the increases have slowed to a small extent, prices are still on an upward trajectory and the feeling among prospective buyers is that they are less concerned by the oncoming ECB interest rate increase, and more perturbed by rising property prices and lack of availability of suitable homes,” said Trevor Grant, chairperson of the Association of Irish Mortgage Advisers.

“On the ground, brokers throughout the country are reporting that they are still incredibly busy as people move to secure homes before costs rise even further,” Mr Grant said.

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Of course, the increase in the value of homes throughout the country is good news for those who already own their own home, and people should be able to leverage off this when it comes to securing better home-loan rates. A lower loan-to-value ratio for these mortgage-holders opens up more opportunities to switching,” he said.