It’s welcome news as the year draws to a close that property prices are consistently rising. Dublin has recorded a rise over the year of about 15 per cent, with some areas increasing above 20 per cent, but it’s worth noting they’re coming up from a very low base, in most cases more than 50 per cent below the peak.

And the tide seems to finally be lifting all boats as prices outside Dublin have risen over the year by about 8 per cent. This should instil confidence and encourage more homeowners and first-time buyers to begin making normal property choices – activity that has been absent for six years now.

For too long the market has been characterised by abnormal activity with many house sales, particularly at the upper end, instigated by receivers and banks. Even where homeowners are selling their own properties sometimes that decision to sell has been “encouraged” by their bank.

The receiver sales can be straightforward, though it’s not unusual for properties to go sale agreed, only to fall through as the receiver decides now may not be the time to liquidate the asset. And where owners are being encouraged to sell, in the initial phase the asking price can be set unrealistically high because they are in denial about selling their home.

Mortgage approval
All of this conspires to make the process utterly frustrating for normal buyers, who are simply in the market for a new home because of where they are in the life cycle. Whether the economy is in a boom or bust phase, this doesn't change. People are still getting together, starting and growing families and pursuing careers. All of these events bring with them property moves from time to time.

The market that has evolved is not accommodating this type of normal activity. The shortage of supply in the capital is driving prices upward, and is exacerbated by sellers adopting a “wait and see” approach, not to mention those who simply cannot move because they are stuck in negative equity. Getting mortgage approval continues to be the exception rather than the norm. Mortgage drawdowns for first-time buyers are running at less than 2,000 each quarter. In 2006, this figure was closer to 10,000 a quarter.

Meanwhile, canny investors are happily picking off prime properties at the right price. The rental market is flying because there is a serious shortage of properties to rent, which has driven rents up by more than 7 per cent in Dublin. It’s something of a no-brainer for cash rich investors – many of them ex-pats – to capitalise in this market.

The big question that arises time and again is whether under the new insolvency and bankruptcy arrangements the market is about to be flooded as banks put repossessed houses on the market.

The answer most likely is no. Firstly, people who need to vacate a house for a sale, whether tenants in a buy-to-let or homeowners, still need to live somewhere, so moving the ownership between different people doesn’t affect supply. Secondly, there is little evidence to date that the banks want to realise the massively-discounted value of these properties by selling them, because they are then left with big losses on their balance sheets.

Certainly there needs to be some new building to meet population requirements. About 900 new homes were built this year in Dublin, while the figures in Cork, Dublin and Galway are negligible. Meanwhile, the ESRI estimates that 15,000 to 20,000 new households are created here annually. Those numbers don’t add up.

Recent calls for Government intervention to address residential housing shortages come as something of an absurdity as the country emerges blinking from the worst property crash the State has ever endured. But because the banks have been so slow to address the mortgage arrears issue – and the problem is not going to get solved overnight – a short-term stimulus of some kind may be necessary.

Suggestions have included incentivising “empty nesters” to downsize, potentially easing the current pressure on the family homes market, and assisting owners of lands with development potential and planning permission to begin building.

The positive momentum currently building around rising prices needs to be boosted by a careful strategic approach to Ireland’s housing needs – at every level. Otherwise, this two-tier market anomaly will persist, and those caught in the middle will continue to be deprived of the normal property choices they are entitled to expect.

It would be a shame to have taken two steps forward this year, only to move one step back in 2014 through further inaction.