House prices in Ireland are expected to rise by up to 5 per cent this year, according to the latest house price survey from property website myhome.ie.
The report, compiled in association with stockbroker Davy, predicts rising incomes and the ongoing economic recovery will lead to a single-digit gain in prices for the next 12 months.
Asking prices on new instructions – which provide the best leading indicator for transaction prices – fell by 0.8 per cent nationally in the fourth quarter of last year but were up 7.4 per cent on the year, myhome said.
In Dublin, asking prices fell for a second consecutive quarter, by 0.1 per cent, but were up 2.6 per cent on the year.
Davy chief economist Conall MacCoille, author of the report, said the Central Bank’s revised mortgage lending rules had prevented homebuyers from taking out higher-leveraged mortgages, thus limiting the pace of house-price inflation in 2015.
“Housing market activity was artificially inflated towards the end of both 2013 and 2014 by expiring mortgage interest reliefs, capital gains tax exemptions and a rush of transactions and mortgage approvals ahead of the Central Bank’s lending rules,” he said.
“In 2015, the usual summer peak for activity reasserted itself with the result that both housing transactions and movements in asking prices in Q4 were always likely to be relatively modest.”
Looking ahead, Mr MacCoille expects a growing divergence between the pace of price rises in Dublin and the rest of the country to continue: “The median asking price for a three-bed semi in Dublin is €275,000, which is six times the average income of €45,600. In contrast, price-to- income multiples in many other areas are still in the range of three to four.”
Mr MacCoille said Ireland’s economic recovery has continued at a “rapid pace” and he expects to revise up forecasts for GDP growth for this year towards 5 per cent, from 4 per cent.
“Income growth is now accelerating, driven by public- and private-sector wage increases, tax cuts and the introduction of a higher minimum wage. The lack of supply in many urban areas also remains acute. So a single-digit gain in Irish house prices, close to 5 per cent, seems likely through 2016.”
