The price of new homes has fallen for the first time in two years as higher interest rates eat into house buyers' budgets. The average price paid for a new home in October was €300,479, around €1,200 less than the average price paid in September, according to figures, released by the Permanent TSB and the ESRI.
The decline is attributed to developers leaving the price of new houses unchanged this autumn in order to keep up the volume of sales, said Rossa White, an economist with Davy Stockbrokers.
There was more evidence yesterday that the current series of interest rate rises is starting to dampen demand for houses. While prices overall are up 11.6 per cent in the year so far, the rate of growth in house prices slowed for the fifth consecutive month in October.
House prices rose by just 0.6 per cent in October, compared with 0.7 per cent in September, and down from increases of more than 1 per cent recorded in each month between May and August.
This is the first time such a lengthy slowdown in prices has occurred since the end of 2004 and the start of 2005, and coincides with the fifth interest rate rise by the European Central Bank since last December. Each quarter point increase is estimated to add €20-€50 to the typical monthly mortgage repayment.
Fianna Fáil backbenchers will today put pressure on Minister for Finance Brian Cowen to introduce measures in the budget to ease the burden on first-time house buyers.
At a special Fianna Fáil pre-budget meeting, TDs will ask Mr Cowen to consider giving first time buyers full mortgage relief at the higher rate of income tax and to raise the stamp duty threshold from its current level of €317,000.
Backbenchers said yesterday that with house prices way out of reach for so many young people, the Minister must do something that will benefit entrants to the property market, but that won't push up house prices at the same time.
Speculation that the Minister may alter stamp duty rates on budget day is also contributing to the softening of the market.
Cork North Central TD and Deputy Government Chief Whip Billy Kelleher said that his colleagues will be urging Mr Cowen for measures that will alleviate the burden on first time buyers.
"It's a huge issue but we have to ensure it is done in such as way that we don't inflate the house market further, and that it is the buyers who benefit," Mr Kelleher said.
On a year-on-year basis, growth rates declined nationally in all market sectors in October, the first time this has happened since December 2004, the data showed.
Commenting on the figures, Niall O'Grady, head of marketing at Permanent TSB, said it's clear that things are moving into a new stage in the price cycle.
"The positive thing is that so far it appears this new phase will be characterised as a soft rather than a hard landing," he said, adding that while the rate of growth is indeed continuing to moderate, the housing market still remains strong.
The average price paid for a house nationally in October stood at €309,963, almost 12 per cent ahead of the price recorded for December 2005.
In Dublin, the average house price increased by just 0.9 per cent in October, down from 1.7 per cent in September, while prices outside of the capital were up only 0.2 per cent, compared with 0.6 per cent the month before.
As a result the average price paid for a house in Dublin in October stood at €423,727, a gain of 15 per cent on the start of the year, while outside of the city average prices were 11 per cent ahead of where they started the year, at €266,912.
In the commuter counties of Louth, Meath, Kildare and Wicklow, price growth slowed to 0.8 per cent in October from 1.1 per cent in September, leaving the average price at €344,431.