No Let Up in House Prices

David Duffy, Economist, ESRI

17th May 2006

David Duffy is our guest blogger, analysing the Quarter 1 2006 figures.

House prices continue to grow. Not only have prices continued to rise at a strong pace but also each year we are seeing a record number of houses built. The Daft.ie survey provides detailed information on developments in the sales and rental markets. This latest report provides more evidence that the prices for purchasers continue to grow. By contrast the rental sector shows signs of levelling off, with indications that rents have come back in some areas.

The recently introduced Daft.ie House Price Index is based on the asking price for the property. The results this quarter confirm evidence elsewhere of a strong housing market with asking prices in April 2006 13.8 per cent higher than they were in April 2005 and 5.5 per cent higher than they were in January of this year. As the index is based on asking prices it provides some measure of people's confidence in the housing market. The increase suggests that people remain confident that house prices will continue to grow and expect to be able to realise a higher price for their house sale in the current environment. The report also provides information on the time to sell a property. On average it is taking 40 days to sell a Dublin City Centre dwelling. At present properties in West Dublin are selling fastest, taking an average of 35 days. When compared with average time to sell in quarter 4 2005 in most cases Dublin properties are currently selling by around a week faster. The data suggest that the most dramatic improvement in time to sell has been in the Dublin Commuter counties.

The Rent Index shows that rents are 4.6 per cent higher in April this year than April 2005. However the index also shows that rents have stabilised over the last couple of months. Additional information provided includes average time to let and average vacancy. Having spiked upwards in the latter half of 2005, presumably reflecting seasonal factors, the average time to let has come back towards more normal levels. A similar trend is observed in average vacancy. Concentrating on the recent data it shows that the time to let can vary from under 2 weeks in Dublin City Centre to around three weeks in Galway and Limerick. Similarly the average vacancy is just over a week in Dublin City Centre but around 2 weeks in the other urban rental markets.

Average rents by area and number of bedrooms show that in some locations rents have actually come back. For example it would now appear to be cheaper to rent a 3 bed in the Dublin City Centre than it was in the last three months of 2005. Across a range of properties rental levels in Cork would also appear to be lower. Given that the snapshot uses average rents it is necessary to wait and see if the trend is sustained over subsequent quarters.

One of the advantages of the Daft report is the information provided on the rental market in different areas of the country. There remains significant geographical variation. As would be expected average rents in Dublin remain substantially higher than in other areas of the country. In the other main rental centres Cork, Galway and the Dublin Commuter counties appear to have broadly similar rental levels. It is also evident that the stabilisation in rental levels in Dublin is being mirrored across the country.

Without a doubt one of the primary factors driving the Irish housing market in the immediate future will be demographic trends. Ireland has a growing population, mainly driven by a strong net inflow of people into the country. This has increased substantially in recent years as migrants are attracted to the Irish economy success story and movement between countries became easier with the entry into the EU of the Accession states in 2004. With inward migration flows forecast to continue, it seems likely that the home ownership and rental markets will remain strong over the short term.

In recent months, concerns have again been expressed about the outlook for the Irish housing market. Without a doubt, higher interest rates will have a negative impact on affordability and so should dampen demand. However economic forecasts suggest that employment and incomes will continue to grow. This year also sees SSIAs starting to mature. Surveys indicate that a sizeable portion of SSIA money will find its way into the property market. Overall economic growth is expected to remain strong at over 5 per cent per annum in both 2006 and 2007. Thus, the Irish housing market should continue to be driven by strong activity levels.


Discuss This Article

  • Re: The Daft Report Q1 2006

    Posted By: Griffith O' Reilly Date: Tuesday May 30, 2006 @01:01PM

    I am recently separated,and had to sell our house to pay settlement,roughly 2/3rd.I am not allowed to first time buyers stamp duty relief.We paid stamp duty on the original purchase of our house 14 years ago,now both myself and my ex-wife both have to pay stamp duty on purchasing along with the buyer of our old house.(3 times stamp duty paid ).Had I been able to buy out the 2/3rd share of the house,my ex- wife would be allowed to stamp duty relief as a "first time buyer",and no stamp duty would have been charged on "sale" of our original house.In this case no stamp duty at all would have been paid.In the present suitation 3 elements of stamp duty can be charged.....IS THIS FAIR and has anyone ever challenged this.If the Stamp Duty was waived for separated people,especially the one who lost most on the split,surely it would make buying again a little more achievable.In my case I am technically "homeless" as I can't compete with first time buyers as anytime I bid they have up to 15,875 advantage over me.Is this fair.Love to hear any comments for or against.

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  • Re: The Daft Report Q1 2006

    Posted By: Brian Foley Date: Tuesday May 30, 2006 @02:21PM

    It does seem unpleasant. For the most part I have found the bulk of revenue relations with house purchasing to be relatively insensitive to non-married parties. For example, the TRS1 form lumps the entire world into "married" or "single". The problem, however, is with what you can do about it. People don't challenge these kinds of things for several reasons. First, where distinctions are made in the revenue system as between married and unmarried units, it is sometimes believed that this is necessitated by how some think Article 41 of the Constitution should be read - i.e. keeping something of a gap between how the State treats marriage and other forms of partnership. I'm not saying this is right, or even the dominant reading of Article 41, but it is defnitely "out there" as one possible explanation.

    If, however, the issue is not a difference in treatment based on something like the above, the best you can probably come up with is some general argument about "fairness" or some argument about inequal treatment within the revenue code - i.e. burdening the separated person in a manner worse than the first time buyer etc. The problem here in respect of challenging is that courts do not tend to want to get involved in these kinds of arguments. They tend to defer to the State's judgment, ostensibly on the basis of the complexity of revenue matters. You really would need something massively horrible and nasty to win a revenue-discrimination case, like an instance of unintended double taxation.

    That may answer part of your question about why people don't challenge these kinds of things.

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  • Re: The Daft Report Q1 2006

    Posted By: Pat Date: Tuesday May 30, 2006 @09:51PM

    A person who haslost their home due to judical separation or divorce may qualify for first time buyers stamp duty relief

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  • Re: The Daft Report Q1 2006

    Posted By: Jack Date: Wednesday May 31, 2006 @02:23PM

    Griffith,

    I assume if you and your wife bought your house 14 years ago, then it has seen significant capital appreciation, the profit on which you have zero tax to pay. That should give you a boost when up against first time buyers who don't have that...

    You will also have 14 years of mortgage payment history, which will enable you to borrow more...(if you paid your repayments on time)

    Good luck with your new life.

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  • Re: The Daft Report Q1 2006

    Posted By: Anonymous Poster Date: Tuesday May 30, 2006 @05:07PM

    I hear what you are saying, and it does seem very unfair.Consider contacting a lobby group for separated people ( Gingerbread) and lobby like hell - an election is coming up..........

    Lots of things in life are unfair; we all have to deal with them. I hope you find happiness in your future and that the separation releases you to do so. The economic cost of marriage breakdown is horrendous, and occurs at a time when there are so many emotional pressures to cope with as well.

    Check out a 25 year interest only mortgage - it can be a way to make cash flow stretch, get back on the ladder again and relieve the pressure you ar feeling now.

    Cheers.

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  • Re: The Daft Report Q1 2006

    Posted By: Anonymous Poster Date: Tuesday May 30, 2006 @05:47PM

    Well I guess I like so many other people who earn between 25% and 30% more than the average industrial wage here in Dublin will never be able to afford to get onto the property ladder unless we commute from Louth, Cavan, Cork etc In effect thereby merely existing to work to pay for a home. But no quality of life. and probably not seeing said home for long enough periods of time to appreciate it. Not mto mention being islotated from everything and everyone known to you.

    I can only say that this report is truly depressing. I don't have parents to lean on for additional money or living inheretence. Despite earning a reasonable salary I can't afford enough of a home loan to buy a car parking space. According to the county councils I earn too much to qualify for social housing or socially asisted buying.According to the banks i don't earn enough to buy my own home.

    So ultimately I am stuck at he mercy of landlords of whom I have little positive to say so I shall say nothing.

    All it takes is for a landlord to want to sell his/her property to make me and many like me homeless - not to mention the many who have no rights as they rent from an owner occupier...

    Don't tell me there isn't a housing crisis

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  • Re: The Daft Report Q1 2006

    Posted By: Alterkocker Date: Tuesday May 30, 2006 @08:56PM

    The situation is nothing less than sickening. Second home buyers in Ireland should be taxed out of existence. Stamp duty should be the same for all house buyers if they are buying one and only one house to live in.
    A decent government would have stepped in long ago to protect the lesser well-off. When the day comes - and it will come soon enough - when the big corporations outsource outside of Ireland as well as outside the USA, and the salaries and wages settle to less than their presently crazily greedy level,the Irish governmnent will not be able to beg for the EU - or indeed anybody - to bail them out they way they have always done in the past.

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  • Re: The Daft Report Q1 2006

    Posted By: SECOND HOMES OWNER Date: Wednesday August 16, 2006 @12:43PM

    NOT ALL SECOND HOME BUYERS ARE THE FILTHY CAPITALIST PIGS YOU SEEM TO THINK.QUITE A FEW ARE REBUILDING THEIR LIVES AFTER DIVORCE AND FAILED RELATIONSHIPS.A LITTLE BALANCE PLEASE.

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  • Re: The Daft Report Q1 2006

    Posted By: Old Paddy Date: Tuesday May 30, 2006 @09:01PM

    Sorry, Griffith, old chum, but there are countless other groups apart from yourselves who need special consideration. This is the trouble with the country: everybody is so damned selfish.

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  • Re: The Daft Report Q1 2006

    Posted By: Anonymous Poster Date: Sunday June 11, 2006 @03:07PM

    Why do we have to have David Duffy's baby face at the top of his article? It is not standard for bloggers to show their mugs.

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  • Re: The Daft Report Q1 2006

    Posted By: David Duffy Date: Monday August 11, 2008 @02:46AM

    David,

    Not only do we share the same name, there is also a strong physical resemblance.

    Cheers

    David Duffy
    Sydney Australia
    Great, great, Grandson of Patrick & Bridget Duffy
    Ex Peninsular War

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