House price rise persists but pace slackens off

House prices in Ireland continued to rise in August though the rate of growth eased on the previous month.

Property cost, on average, 15 per cent more than in the same month last year.

The August figures from the Permanent TSB House Price Index also show a widening gap between Dublin and the rest of the State in the price of property.

Nationally, the index showed that prices climbed 0.8 per cent in August on a monthly basis, down from 1.1 per cent in July.

On an annualised basis, July's 15.6 per cent rate of growth slipped to 15 per cent.

However, that is still ahead of the 14.7 per cent and 14.1 per cent recorded in June and May respectively.

Mr Niall O'Grady, head of marketing at Permanent TSB, attributed the slowing rate of growth to an increase in housing supply. "We welcome the emerging signs of moderation in the rate of growth and expect this to continue as the supply of new houses continues to increase."

The index. compiled in association with the Economics and Social Research Institute (ESRI), showed the average price for a house in the State in August was €224,340. That is almost three times the price back in August 1996 when the index was first produced.

The gap between house prices in Dublin and elsewhere in the State has widened even more dramatically in the period.

In the most recent survey, the Dublin house costs €298,196, up 1.4 per cent in August and 18.1 per cent over the 12 months. Property elsewhere in the State was €194,125, 0.8 per cent ahead of July and 12.9 per cent more expensive than in August 2002.

That is a difference of €104,000, almost seven times the differential in August 1996 when a home in Dublin cost, on average, the equivalent of €89,032 and a house outside the capital €73,782.

"This underlines the need to drive a strategy of limiting the growth of Dublin and direct development and growth to other areas of the country," said Mr O'Grady. Despite a surge in the price of new homes in August, the value of second-hand property continues to rise more rapidly in the longer term, according to Permanent TSB, which accounts for about a quarter of all mortgages taken out within the State.

In August, the cost of a newly-built property rose by 2.7 per cent to €216,889 while second-hand homes were just 0.3 per cent up on the month to €231,522.

In July, both sectors rose by 1.4 per cent but over the past year, existing homes have jumped by 16.3 per cent compared with an 11.4 per cent rise in the price of a newly-built property.

Reversing a trend earlier in the year, first-time buyers are seeing prices rise less steeply than those moving up the housing ladder.

Despite the rise in the price of new homes, first-time purchasers saw no increase in prices in August while second-time buyers were paying 1.7 per cent more than in July.

Over the year, first-time purchasers have seen prices rise by 14 per cent, slightly less than the 15.6 per cent rate for people moving homes.

The average price paid in August by a first-time buyer was €195,775, over €24,000 more than a year earlier, according to the Permanent TSB data. Existing homeowners paid an average of €253,700 to move homes.