House prices slow as rate rise takes effect

House prices are still on the way up, but the rate of growth continues to fall, the Permanent Tsb/ESRI house price index has revealed.

Recent rate rises by the ECB are being blamed for the slowdown.

Nationally, house prices increased by only 1.1 per cent in July, the third month in a row that growth has reduced. In June, house prices rose by 1.2 per cent, while May saw a growth rate of 1.6 per cent.

However, the rise in property prices for the first seven months of the year is higher than expected, at 9.1 per cent compared with 3.3 per cent for the same period in 2005.

On average, house prices grew by 1.3 per cent each month over the seven-month period.

In the past 12 months, house prices nationally have risen by 15.4, per cent, more than twice the 6.2 per cent recorded in the 12 months to July 2005.

The average home now costs €303,274, some €25,000 more than the €277,852 recorded for December 2005.

"It's clearly too early to reach any definitive views as to what impact the recent series of interest rate rises will have on house price inflation, but these figures will give support to those who believe that the rise in rates will lead to a reduction in the rate of price growth," said Niall O'Grady, head of marketing, Permanent Tsb

"Having said that, some sub-sectors of the housing market have seen strong increases during the month so the picture varies quite significantly from sector to sector. Overall most people will agree that the rate of price growth in the year to date has been surprising.

In that context, I believe that a cooling of prices would be welcomed across the economy."

Houses in the Dublin area continue to rise at a faster rate than other areas around the country, rising 1.6 per cent compared with 1.2 per cent during the month of July.

The average price paid for a house in Dublin during July was €408,959, compared with €262,142 outside the capital.

The boom continues to have a knock-on effect in the surrounding counties. Property in the Dublin commuter counties of Louth, Meath, Kildare and Wicklow are also becoming more expensive.

House prices in these counties grew by 1.9 per cent in July 2006, compared to 1.4 per cent in June 2006. The average price of a house in the commuter counties rose to €333,897 in July, compared with €298,866 in December 2005.