Irish house prices were back in the news yesterday, with figures from Eurostat showing that property prices here rose faster than anywhere else in the European Union last year.
The data from Europe’s official gatherer of statistics say that, in the final quarter of 2014, prices were 16.3 per cent higher than in the same period in 2013. That was a full 5 per cent and more ahead of the next most bullish market: Malta, on 11 per cent.
Across the EU as a whole, the average house price rose by 2.6 per cent, Eurostat reports, and by just 1.1 per cent in the euro zone. Slovenia, Cyprus, Latvia and Italy were among countries reporting a fall in property values in 2014.
For those worried about a re-emerging bubble, the good news is that the rate of increase in prices in the Irish market eased as the year progressed, from 6.8 per cent in the second quarter to 6.2 per cent in the period to end-September and 3.8 per cent in the final three months of 2014, putting us behind Malta for that period.
While the rate of house price growth may be slowing, the same cannot be said for rents.
Last week’s consumer price figures featured housing as the largest positive contributor to what was admittedly decidedly muted inflation.
Aside from mortgage interest and utilities (including water), this category includes rents, which rose for the 31st month in succession.
At 8.5 per cent, the annual rate of growth in March is similar to recent months and well below the Eurostat house price figure. However, as Goodbody economist Dermot O’Leary noted, house price inflation is slowing but rental growth is rising.
O’Leary estimates that rental yields widened to 5.5 per cent in the first quarter of this year. That’s above the not unimpressive yield of 4.4 per cent since the arrival of the euro back in 1999, and with not enough houses being built currently to meet demand, he expects “further strong growth in rents over the coming years”.
That’s good news for property investors, but it will do little to calm the growing political pressure to move on rents.
