House prices show fresh signs of slowing as annual rate of increase falls to 13%

The Irish housing market is showing definite signs of cooling as the cost-of-living squeeze and higher interest rates dampen demand. Central Statistics Office (CSO) figures show the annual rate of increase in prices fell to 13 per cent in July, down from 14 per cent in June, extending a pattern of deceleration seen in recent months.

Year-on-year inflation in Dublin, where supply pressures are most acute, fell to 10.4 per cent, down from 11.3 per cent. Prices outside Dublin rose by 15.2 per cent.

The CSO said the value of its residential property price index in July, at 164.9 points, was 0.8 per cent above its highest level recorded at the peak of the economic boom in April 2007. However, actual property prices are not yet at the level recorded in 2007 before the market crashed.

Price growth in the State’s property market had been on a steep upward trajectory during the pandemic, fuelled by factors such as increased savings, remote working and lower-than-anticipated supply.

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However, cost-of-living issues combined with higher interest rates — the European Central Bank raised interest rates by an unprecedented 0.75 per cent earlier this month — have begun to exert downward pressure on the market. Higher interest rates mean higher mortgage repayments.

The latest figures show households paid a median (midpoint price) of €295,000 for a dwelling on the residential property market in the 12 months to July. The Dublin region had the highest median price (€415,000) during the 12-month period.

Within the Dublin region, Dún Laoghaire-Rathdown had the highest median price (€610,000), while South Dublin had the lowest (€380,000). The highest median prices outside Dublin were in Wicklow (€414,000) and Kildare (€353,000), while the lowest price was €145,000 in Longford.

The latest data shows property transactions rose month-on-month by nearly 9 per cent to 4,443 in July and were worth a total of €1.6 billion.

The Institute of Professional Auctioneers and Valuers (Ipav) said the slowing rate of increase in prices chimed with its own findings which are based on a six monthly barometer of prices achieved by auctioneers.

“There was a noticeable change in the months of May and June where price increases slowed. We see this trend continuing. However, what is truly unfathomable is the major increases taking place in the ECB interest rates, 0.5 per cent in July and a further 0.75 per cent in August,” chief executive Pat Davitt said.

Mr Davitt said the current very high level of inflation is being driven largely by the energy crisis arising from the invasion of Ukraine by Russia. “It is largely outside the control of consumers who are going to be whacked by such increases with further rises threatened,” he said.