House prices stall in first quarter

House prices have stalled in the first three months of the year, according to figures compiled by Permanent TSB and the Economic and Social Research Institute (ESRI).

The latest monthly house price index states there was no increase in prices in February, with prices at the end of that month just 0.1 per cent higher than they had been at the start of the year.

Prices nationally rose by 9.6 per cent on average over the past year - the first time since December 2005 that the annual rate has dipped below 10 per cent. Last August, the annual pace of house price inflation was running at 15.4 per cent.

Rising interest rates and continuing uncertainty over stamp duty reform ahead of the general election have been blamed for holding back prices. The index notes that prices nationally have risen by just 1.6 per cent in the past six months.

A separate survey by estate agents Sherry FitzGerald yesterday stated the average price of a second-hand property nationally had fallen by 1.1 per cent in the first three months of the year. A 2.3 per cent decline in Dublin prices more than offset a marginal increase of 0.2 per cent elsewhere in the State.

Marian Finnegan, chief economists at Sherry FitzGerald, said the fall in prices "largely reflects the impact of a reduction in consumer confidence in the performance of the market" - a situation she said was triggered by "misguided commentary on the future of stamp duty".

Anticipation of a change in stamp duty in the last budget, together with rising interest rates and a "stronger than usual stock of second-hand properties in the market", had served to erode consumer confidence, she said.

Niall O'Grady, head of marketing at Permanent TSB, said moderate price growth was likely this year. "The housing market is clearly in a period of price realignment," he said. "Clearly stamp duty uncertainty in advance of the election is a factor, as are recent rises in interest rates."

While Ms Finnegan foresees a "restoration of confidence in market conditions", Permanent TSB said it was difficult to imagine momentum coming back into the housing market until the stamp duty issue is resolved after the election.

The average property across the State cost €311,078 in February, according to the Permanent TSB/ESRI data, just under €27,000 more than the €284,089 average at the same time last year.

Prices in Dublin rose by 0.2 per cent in February, while the value of property elsewhere slipped 0.1 per cent. Year on year, Dublin homes were 13.2 per cent more expensive, while the value of property outside the capital increased at a more moderate 8.7 per cent. The average price of a Dublin home was €428,850, compared to €267,293 elsewhere.

The commuter counties of Louth, Meath, Kildare and Wicklow saw a 0.9 per cent decline in prices in February after a 0.1 per cent fall in January. However, strong demand last year means prices remain 10.6 per cent ahead of the year-ago period.

First-time buyers saw no change in prices during the month, while for those moving up the housing ladder, prices eased 0.4 per cent. On an annualised basis, first-time buyers are now paying 10.2 per cent more than last year.

One of the strongest growth areas in February was the price of new homes, which jumped 0.7 per cent against a dip for send-hand property. Sherry FitzGerald says demand from first-time buyers remains buoyant, accounting for 34 per cent of property sales this year. Investors also remain active, purchasing 21 per cent of second-hand properties in the first three months of 2007.