Irish House Price Report Q3 2016 |

The figures in this latest Report show the continuing ill-health in Ireland's housing market. Prices rose almost 3% between June and September, a rise that was only slightly smaller in Dublin (2.7%) than elsewhere (3.0%). It means that the year-on-year rate of inflation increased again, from a low of 6.1% in Q1 2016 to 7.6% in the third quarter.

The increase in annual inflation in Dublin – from 1.1% last quarter to 5.3% now – is particularly worrying. In part, it reflects a decline of 1.4% in the third quarter last year falling out of the calculation. But equally, it reflects the 2.7% increase in the last three months, the largest quarterly increase since early 2015.

Most and least expensive areas

This does not reflect the failure of the Central Bank rules. Rather, it reflects the underlying reason the rules were introduced in the first place. The rules were brought in to limit the potential for a severe imbalance between strong housing demand and very weak supply to damage the wider economy. However, those rules can only prevent damage through the financial system – a credit bubble, in effect.

There are other ways in which a dysfunctional housing market does wider damage, though. We have seen this clearly over the last five years, with growing homelessness of those who effectively fall out the bottom of the private rented sector and are forced to live in hotels and guesthouses. This is a symptom of social housing system that is simply not fit for purpose.

We know how a social housing system ought to work. It should give those who have insufficient incomes to cover the costs of their own accommodation enough of a top-up that they have somewhere to call home. This means it should be explicitly counter-cyclical: when the provision of market housing falls, the need for social housing rises. Tying the provision of social housing to market housing – as Ireland has done – makes no sense whatsoever.

Speed of sales continues to improve

The rise in prices recently – in both listings and in transactions – is not the only sign of a market under strain. Survey respondents now expect house prices to increase 4.7% over the next year, almost twice the expected increase six months ago. Transaction prices are now on average 2.2% above the initial listed price, compared to 1.5% above a year ago. And just 36% believe the market represents good value nationwide, down from 50% two years ago.

This is not to say that all aspects of the market are as bad. The number of transactions is holding up – with as many transactions recorded in the second quarter of 2016 as in the same period in 2015. The stock on the market has stabilised, while new building is picking up – albeit much slower than is needed.

The graph shows the number of new homes sold each quarter, for Dublin and for the rest of the country. The peak in sales in late 2014 (and again in mid-2015) represents a "cramming" of demand following the introduction of Central Bank rules. These outliers aside, it is clear that the trend over the last five years is upwards. For example, the number of new homes sold in Dublin in the first half of 2016 was 63% higher than in the first half of 2014. Elsewhere, the increase was smaller (15%) but the direction is still encouraging.

Annual changes in prices, by Dublin postcode

With this evidence, it is tough to argue that there is a compelling case for help for first-time buyers in the upcoming budget. This is particularly the case once the potential negative side–effects of further stimulating demand, in order to bring about more supply, are factored in. Indeed, anything that could be achieved – in terms of additional supply – by helping first–time buyers bid more against each other could also be achieved by lower the cost of building the typical home.

Politically, it may be necessary to be seen to be doing something to help first–time buyers. However, once the Budget passes, it will be time to focus on the far more important business of lowering construction costs in order to make new homes affordable for those on average incomes.

Average asking prices and annual percentage increases

Discuss This Article

  • Re: The Daft House Price Report Q3 2016

    Posted By: Anonymous Poster Date: Thursday October 6, 2016 @04:16PM

    Ronan Lyons for Taoiseach!

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  • Re: The Daft House Price Report Q3 2016

    Posted By: John Date: Tuesday October 11, 2016 @10:44AM

    The solution to the housing shortage lies solely with the government and could be fixed immediately with the lowering or abolishment of VAT rates on construction. This could be removed temporarily until supply adequately addresses the housing shortage crisis as builders could build and make profit. VAT could then be reintroduced at a lower rate at a later date once the supply issue is addressed and allow the construction industry to continue.

    The main construction of housing that I see currently is small expensive developments and high density apartment blocks which can be still built at profit with the high VAT rates but does not address the issue which is the construction of typical 3 bed semi's for the mid to average earners.

    Everything is been done to protect rising house prices as vested interests within the government which we elected are protecting their own property portfolios which is wrong and not for the greater good of the population.

    The first time buyers tax income refund of 5% in the next budget is a will do only one thing which is increase the price of new builds by this amount or more but will probably increase sales but the issue will still remain.

    The central banks lending criteria should remain as without this we would be seeing increase of house prices by probably 15% each year and would result in a second crash and another generation of people in negative equity.

    It is all very sinister in my view.

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  • Re: The Daft House Price Report Q3 2016

    Posted By: Anonymous Poster Date: Monday October 17, 2016 @12:56AM

    It is so sad to hear that the housing issue is getting worst, I live in England and after one year of workin I was able to apply for a mortgage for a house, I think if you have a job and can save you should be able to buy a house but that\\\\\\\\\\\\\\\'s not the case in Ireland the rents are far too high and the banks don\\\\\\\\\\\\\\\'t easily lend.

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  • Re: The Daft House Price Report Q3 2016

    Posted By: Anonymous Poster Date: Monday October 17, 2016 @08:04PM

    Many young people just rent then blow the rest of their income, making little attempt to save.........the local chippy and a cheap flight too Spain is their priority......sad, very sad. Its never been easy to buy a home....NEVER.... It seems that this current generation has the expectation but without any graft involved. Moan moan moan. I rent too people who have no respect for my property........if the are evicted and freeze in a doorway its their own doing......Government needs to crack down on those unwilling to help themselves rather than on those in genuine strife.

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  • Re: The Daft House Price Report Q3 2016

    Posted By: Anonymous Poster Date: Monday October 24, 2016 @09:41AM

    I agree with the person writing about house buyers moaning the whole time. They don't save, expecting cheap rent or to get the council house. The landlord pay mortgage, property taxes, etc, and they also have to repair the property after awful tenants. The potential buyers should lower their expectations and get the reality check, if you want to purchase your own home, save for it, instead of going on holiday and buying new cars.

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  • Re: The Daft House Price Report Q3 2016

    Posted By: Gar Date: Tuesday October 18, 2016 @11:32AM

    As someone (mid-thirties) who has had to find somewhere to rent in Dublin, while simultaneously trying to buy, I have seen a lot of both sides of the market recently. I have been shocked and disgusted by the exploitation of renters that is now normal in Dublin - far worse than what I saw in 2006-2007. 'Highlights' included being offered a completely windowless double "bedroom" on a rigid one year lease in Milltown for approx. 725, sharing with 4 others in Harold's Cross with 950 per room plus 150 per month each for bills (only pure greed can explain that figure). I could afford up to 950 per month yet I received only about 15 replies out of over 100 enquiries. My search began after my landlord crafted a story to circumvent the so-called rent-freeze so that they could rent to someone else at a higher price.

    To suggest that so-called millenials can't buy because they lack discipline is ridiculous in such circumstances - particularly coming from a smug landlord. While my parents made significant sacrifices to buy their first home (e.g. far higher interest rates), there is no way that two similar first-time buyers with the same jobs could afford to buy the same house now, regardless of saving or not.

    My experience of trying to buy has not been much better. Despite significant savings built through hard work (hang on, I though 'millenials' didn't save?) it is very challenging due to the lack of supply. The properties I view have significant constraints (including the dreadful quality of Celtic Tiger era apartments) and even then my offers have resulted in protracted bidding wars. Hopefully I will succeed soon as renting is not a viable existence in Dublin with not signs of improvement.

    Rather than making silly uninformed comments about younger people it is in the interested of everyone in society (including vested interests like landlords) to push for a normal, functioning property market. For example if young people - the half who didn't emigrate - are crippled with high rent into their forties who exactly will pay for the healthcare and more generous pensions of our aging population?
    Ronan Lyons is correct that we need real vision from government. The budget was completely visionless did nothing worthwhile to really stimulate supply, particularly in Dublin. We need to build, build, build (starting with social housing), to properly tax hoarded land and derelict sites (the stick) and look at building costs (the carrot).

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  • Re: The Daft House Price Report Q3 2016

    Posted By: Bobby Date: Wednesday October 19, 2016 @07:20PM

    Absolutely Gar, to come on to the daft report page and complain about 'moaners' and then proceed to moan about your own position due to no doubt lack of business acumen, is very typical of the Irish 'landlord'. I think landlords forget that the nature of their 'business' is itself parasitic and does not encourage development of any skill in particular, solely the counting of revenue. Gone are the days when someone could even reasonably think that society owed them a living because they were in the position where they owned a second house. Good riddance to them.

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