House prices are rising at faster than at any time since 2000, new data suggest. Prices are more than 13 per cent ahead of the same time last year and have increased by 5 per cent, on average, in the first four months of 2006, according to the Permanent TSB/ESRI house price index, published yesterday. Marc Coleman, Economics Editor reports.
Niall O'Grady, head of marketing at Permanent TSB, said the pace of price growth was likely to slow, but Irish Intercontinental Bank (IIB) economist Austin Hughes warned that continued borrowing could push house prices even higher in coming months.
The price of an average house was € 291,678 in April, compared to € 277,852 last December.
In the 12 months to the end of April, the average property across the State cost 13.2 per cent more than a year earlier.
That is just over double the 6.5 per cent growth rate for the previous 12 months and and is an acceleration of March's annual figure of 12.1 per cent. The monthly rate of house price inflation accelerated in April to 1.4 per cent, from 1.3 per cent in March.
Outside Dublin, an average house cost €252,030 in April compared with €388,466 in the capital, while in the so-called "commuter counties" of Louth, Meath, Kildare and Wicklow it reached €316,749.
"Average prices are now heading to hit the €300,000 mark in the next few months," said Mr O'Grady.
"This strong growth is evident across all the main customer segments."
He noted that prices outside Dublin averaged over €250,000 for the first time in April, while Dublin prices were set to top €400,000 before the end of the year.
But he added that interest rate increases were likely to slow growth to an average rate of 10 per cent by the end of the year.
Mr Hughes said borrowing pointed to higher growth in the 12-member euro-zone currency area.
"The current pace is the strongest since the late 1980s... there is a concern that a good deal of the acceleration in household borrowing in recent months will merely translate into higher house prices," he said.
Citing figures released by the European Central Bank (ECB), he said that loans in the euro area were now rising by 6.8 per cent across the euro zone, representing its strongest pace since that of late 1989.
Mr Hughes said that recent turbulence in equity markets would prevent the ECB from raising rates by more than one quarter of a percentage point when its governing council meets later this month.
But he added that the pace of increases could quicken over the remainder of the summer.
Monthly credit statistics, to be released today by the Central Bank of Ireland for April, will provide some indication of whether the ECB's March rate rise has impacted on the pace of lending growth.
