House prices have risen by 270 per cent over the past decade, equivalent to an average of 15 per cent per annum, according to a review of the housing market published yesterday. Over the same period, the consumer price index has risen 30 per cent.
The review is based on data from Permanent TSB and the ESRI, which started publishing the monthly house price index in 1996.
The review finds that house prices in Dublin were €130,000 more expensive than in the rest of the State in 2005, compared to a €10,000 difference in 1996.
Government policies may have contributed to strong house price growth in recent years, according to data presented in the report.
Growth in house prices reached a peak of 30 per cent in 1998 before declining to 4.5 per cent in 2001, the report finds. Growth rebounded from the end of 2002 and into 2003, however.
Data in the report highlight the Government's decision to abolish higher stamp duty rates for investor buyers and to restore interest relief on rental properties during that latter period as events associated with rates of house price growth. Annual growth in house prices accelerated from 5 per cent to almost 15 per cent during 2003.
The report also finds that the value of all houses in Ireland has risen fourfold in the past 10 years to €412 billion. While 55 per cent of properties were priced under €250,000 in 1996, this applied to just 1 per cent of properties in 2005.
Price growth in the period was strongest in Wicklow, where values rose by 310 per cent, and lowest in Roscommon, where prices rose by 195 per cent. House price growth has occurred despite an increase in the number of new houses built each year to 80,957 in 2005 from 33,700 in 1996.
"We have been through an extraordinary decade in the Irish housing market. For many that decade has been challenging in the extreme," Niall O'Grady, head of marketing with Permanent TSB said yesterday.
"Undoubtedly the boom in the housing market has brought along issues that need to be addressed," said David Duffy of the ESRI.
However, the report also suggests that average costs of mortgage servicing have remained broadly stable at around one-third of personal disposable income. Permanent TSB chief executive Denis Casey said yesterday that house purchasers are not experiencing difficulty meeting repayments. "Our 30-day mortgage arrears have never been lower, whether in absolute or relative terms."
Mr O'Grady added that fears of a property crash were misplaced and young people should not be discouraged from house purchase. "Our prediction over the next 10 years is that we expect growth to average around 5 per cent. This is a long-term decision."
Labour party environment spokesman Eamon Gilmore said the figures indicated that house prices levels in Dublin would "kill the capital".
