House prices dip as proposed mortgage caps dampen expectations

Ronan Lyons, Economist

5th Jan 2015

Ronan Lyons, Daft's in-house economist, commenting on the latest Daft research on the Irish property market.

House prices dip as proposed mortgage caps dampen expectations

The average asking price for a house in Ireland fell by 1% in the final three months of 2014, according to the 2014 Year in Review House Price Report released today by Ireland's biggest property website, Daft.ie. This is the first time since mid-2013 that the average house price fell in a three month period.

Despite this recent fall, the average asking price nationwide is now €193,000, 12.8% higher than the value of €171,000 a year ago. This compares to €378,000 at the peak in 2007.

Asking Prices, Residential Sales - Stock of Properties on Daft.ie

Prices in Dublin fell back by 0.7%, the first drop since mid-2012. While there was a fall between September and December, significant increases earlier in the year mean that prices remain higher than a year previously. Annual inflation in the capital has eased from a high of 25% in September to 20% in December. Outside Dublin saw a similar trend with three-month minor falls in the average asking price throughout Leinster.

How have house prices changed?

This pattern was replicated in other cities also, with Cork and Galway cities experiencing quarterly price falls of 1%, while Limerick and Waterford cities saw more significant falls of between 3% and 4% on average. Outside the main cities, the average asking price across the country fell by 1.3%, but remains 7.6% higher than at the same time last year.

Commenting on the figures, author of the Daft.ie Report, Ronan Lyons said: “The intention of the proposed Central Bank limits on mortgage lending is to limit increases in house prices by affecting both buyer expectations and the credit available to them. It seems that, even though the limits have not yet come into force, they have already had some impact. For example, When asked what they expected will happen Dublin house prices over the coming 12 months, survey respondents in September expected an increase of 12%. In December, however, that figure had fallen to 5%”

“Restricting the amount lent to each household is a necessary first step to ensuring a stable housing market. The second step is addressing the cost base, to ensure an adequate supply of housing. With fewer than 30,000 properties on the market currently - and just 3,500 of those in Dublin - this is the challenge for policymakers as we move into 2015.”

SNAPSHOT:
Average asking prices across Ireland (€000s), and annual change (%) 2014 Q4

Snapshot of Asking Prices Nationwide
Snapshot of Asking Prices Nationwide

Discuss This Article

  • Re: The Daft Sale Report Q4 2014

    Posted By: Anonymous Poster Date: Monday January 5, 2015 @10:50AM

    Seems that if the central banks regulation comes to pass and supply does eventually increase that housing will only devalue to the price it should be. My income has been decimated since the crash so to quote prices of 2006-2007 is not applicable as i earned alot more then and credit was freely available.
    I am currently saving my deposit as I see it as the only option to gain a mortgage which may be a hard pill to swollow initially but will sever myself and others in a simialr position well in the future with interest rates at historical lows now. whos to say where they will be over a 30 year mortgage period. Better to have a large deposit and smaller loan to cover the future shock of rising interest rates.

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  • Re: The Daft Sale Report Q4 2014

    Posted By: Sarah Date: Monday January 5, 2015 @10:51AM

    On page 6 you say "transaction prices rose by less than 2% in the final quarter of 2014" but the figures on the left show transaction prices moving from 119.2 in September to 117.0. Should this read a fall?

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  • Re: The Daft Sale Report Q4 2014

    Posted By: John Date: Monday January 5, 2015 @11:44AM

    Figures for Laois are absolute nonsense - could double these asking prices easily.

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  • Re: The Daft Sale Report Q4 2014

    Posted By: Michael Date: Wednesday January 7, 2015 @04:01PM

    Hi,

    I'd like to challenge the notion that Central Bank Rules have caused the slowdown in price increases. I would have expected it to have the opposite effect in the short term driven by people in the following circumstances;

    I'm a first time buyer and have been saving for a deposit for the past 7 years. I'm almost there in terms of what I feel I needed. Then last Oct the Central Bank announced their restrictions, and that these would come into place in Jan 2015.

    Panic sets in... As far as I'm aware, I had 2 months to get mortgage approval and go house hunting. If I didn't get a house in the next few months, I would end up needing to save for another 7 years.... (2X what I've already saved). Eeeek!!!

    I'm sure there are plenty of other people who had similar thoughts, and have had their deposit and approval ready to go.

    So my question is which of the following makes more sense when your ready to pull the trigger and buy...

    1/ Reset my expectations because of the new CB rules, and have myself thinking that prices might level or even drop and I could get a better deal... I know we wont go back to drops of 2009 / 2010 because people already see value, but limited supply. But at the same time also knowing that not pulling the trigger puts me in a position where I may need to double my deposit, and put my plans back by another 5 years?

    OR

    2/ Accept that prices might stabilise, but I'm not going to get a bargain from todays prices, and go ahead and pull the trigger, or miss my opportunity to get a house I've been saving for over the past number of years. I know that doing this gives me limited options in terms of supply.

    In my opinion, this comes down to Risk / Reward.

    There isn't enough reward in the risk of holding off on buying now if new CB rules come in... At least for first time buyers...


    With all that said, we've been hearing that the market in the past couple of years has been driven a lot by cash buyers. As a cash buyer, CB rules don't impact you, so there are benefits to holding off and waiting to see what the market does.

    However if its the cash buyer profile of the market that is driving this slowdown as opposed to anything else, the report isn't clear in this.

    I would love to see a stronger argument for why prices have slowed as a result of new CB rules. Stating that its a reset of expectations is too fluffy because different profiles of the market have different drivers behind a house purchase... not everyone's after capital appreciation, and not everyone can ignore new CB rules if / when they come in.

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  • Re: The Daft Sale Report Q4 2014

    Posted By: Rob Date: Friday January 9, 2015 @11:48AM

    No one will press and buy who has began theirs families in 2008/2010. Why ? That is easy families are growing and salaries not any more . If you have now 2 kids in age of 4 and 6 your school asking to spend , your bills are bigger ( food , Clothing ect.) You think any from those people have the savings to pay deposit? No , all of them are waiting for better time with salaries and maybe lower taxes witch none of that will came any soon.

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  • Re: The Daft Sale Report Q4 2014

    Posted By: David Date: Thursday January 8, 2015 @04:22PM

    Plenty of value in the east of the country. Why do people in Dublin feel they have entitlements to buying a house there when the rest of us accept higher prices in city centres and but what we can afford in the country.

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  • Re: The Daft Sale Report Q4 2014

    Posted By: David50 Date: Friday January 9, 2015 @10:57AM

    Michael above I think has a good point. I would have expected the short term response by the public to be to try and rush out and buy before the new central bank rules come into place. The graph showing sales last year shows a serious drop in sale completions in the last quarter. This is not addressed in the report. These reports are meant to be written by an economist so some reflective thought would be good rather than writing a report to reflect the title.
    The report this month is entitled - house prices dip as proposed mortgage caps dampen expectations - and the report is written to support this title. Previous reports have had a similar approach. I could have written a report entitled - house prices dip as capital gains tax break comes to an end - and written a speculative report to back this up.
    The Irish property market is still not functioning, it is still broken and nobody from daft appears to have the energy to examine why this is so. The banks are still not lending no matter what they say, they will lend to a small elite but not to the general public. Supply is tight even though there are many empty properties nationwide, 10's of thousands of second home owners are losing money on their investment in the hope that prices will rise and rise and the banks are not advising them to cut their losses. Nobody is talking about what will happen to all those in mortgage arrears.
    Who has been buying houses in the last 2 or 3 years? How many were bought by cash or near cash buyers, how many were bought by investors. Anecdotally I know one person who had a 75% deposit and the means to repay the rest as mortgage but found it very hard to get a mortgage from the banks. One would have expected the investor to pull out and stop buying well before the dead line and this may well be what has happened. It can take months and months to complete a sale and no investor wants their completion to be in the first week in Jan 2015 rather than the last week of Dec 2014. If that happened then the investment must get its return from rent only.
    Noonan was deliberately inflating prices by abolishing capital gains tax and he gave a lot of notice that this plan was to change in Jan 2015 so you would expect the market to respond, the current investors are wanting value and it is just business to them. Why not give some analyses as to who is buying in the hope of shedding some light on the future. Some mention of the changes in capital gains tax would be expected even if just for completion sake.
    will the profile of those now completing sales change as a result of the changes in the central bank rules and the end of capital gains holidays and what effect will this have on prices and rent prices. I dont know what the changes will bring but the issues are complex and should be treated as such.

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  • Re: The Daft Sale Report Q4 2014

    Posted By: Mick Date: Friday January 9, 2015 @09:33PM

    Hi, I have my deposit and mortgage approval. However It's one year that I'm looking for a property with acceptable standards and yet I did not have luck. The options were very few and those properties in the market were already old. I will definitely hold until there will be new developments to satisfy the market demand. All properties I see today are old and expensive. So I'm not feeling to commit myself for a life time to a mortgage to pay a house that will not last longer than the mortgage. I'm considering actually to invest the money abroad if things to not get back close to 2012/2013 prices.

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  • Re: The Daft Sale Report Q4 2014

    Posted By: anonim Date: Tuesday January 13, 2015 @07:08PM

    This is just madness!We have 2 children. Pay 1150 rent per month this is all my monthly salary. How to earn money on deposit with which to buy property?

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  • Re: The Daft Sale Report Q4 2014

    Posted By: Lena Date: Wednesday January 21, 2015 @07:37PM

    Just want to share some thoughts and observation. And in particular, what is the effect of house prices manipulation. To give you an example, currently I am looking for the house and the one I was interested appeared in the market just month ago in Maynooth. It's initial price put on daft website was 135K EUR, it is possibly a bit lower than other houses with the same configuration, but it was not in the perfect condition and needs full reconstruction. Agent organized an open viewing were over 20 people were attending over the 2 hours slot. Agent also told that the house is bank's property. After 2 days house price increased to 190KEUR and after the week, which is now it stands 201K EUR. I am not sure what is going on here but I don't think the bank not sure what is the market value of the house by putting down low initial value and why the concern with open viewing was required when there was no intention to sell the house. And if the is many "shadow houses" like that then it makes sense fast growth in house prices and long viewing lint of people coming to see the houses (which they will not get as it is only cheap to create panic and stimulate price growth)... As I say just thoughts but would be nice to have those cases reported somewhere for detailed examination..

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  • Re: The Daft Sale Report Q4 2014

    Posted By: Bob Date: Friday February 6, 2015 @07:36AM

    As noted by others above, the Irish housing market is not functioning properly. There are too many variables at the moment, low stock, lots of prospective first time buyers, high rent limiting deposit saving, new bank lending regulations, quantitative easing on the way, the list goes on.

    Talk to some, the market is going to pick up, talk to others, it won't. In reality, even the smartest economists don't have a clue how it's going to pan out.

    In my opinion as a prospective first time buyer, unless quantitative easing results in salary increases, the market will come to a stalemate. People are limited in what they can borrow so unless pay goes up, prices will have to come down.

    Government needs to heavily tax rental income to promote increased sales of investment properties. Of course this won't happen as these properties are owned by the rich people not the poor sod looking to buy a house to live in.

    Ireland is still in the stone age. I'm sitting on my deposit and waiting a few months. It's a gamble, but with lending limits, how can the market price go up further unless stock goes down further or investors buy up what's left?

    3.5 times income and the 80 to 90% lending? If a joint income is 100k, that's the mortgage maxed at 350k. You'll need 50k deposit and you come away with a 400k property. Currently that's a 3 bed semi in a reasonable area. Not great for 100k joint income.


    242 156

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  • Re: The Daft Sale Report Q4 2014

    Posted By: Anonymous Poster Date: Saturday February 7, 2015 @01:10PM

    I think the central bank will change to maybe 4 times salary and 10% up to 300k.
    Who has two 50 k salaries ? 2 Gardai 2 teachers maybe but most young people are not on 50k.each.

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  • Re: The Daft Sale Report Q4 2014

    Posted By: Paul Date: Monday February 9, 2015 @01:27PM

    The central bank will not change to 4 times salary as it will only help price increase which they hope to stop. Prices must come down as salaries will not increase, the lending regulation which should have been there all along is there to protect people from a repeat of banks overlending to people who cannot service these large mortgages over 30 years. It is unfortunate how unfair the property market is, and it is unfortunate that the average person has so much hardship trying to buy a house.
    The onus is on the government now to aid supply. Hopefully common sense prevails as the central banks regulation is the first thing that has been sensible.
    I also wish to purchase a house and save as much as possible but feel the time is not right at present there is still alot that needs to be changed. I do not want to be a debt slave just to own an overpriced property and have no quality of life.

    My opinion is that prices will drop but how long that takes is anyones guess unfortunately.

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  • Re: The Daft Sale Report Q4 2014

    Posted By: KEVIN Date: Monday March 9, 2015 @10:18AM

    looking to buy a property in kerry [im a cash buyer ] they have been reduced from over 300/to 138 good spot great for a holiday home ,,their in a crescent good standard finish 12 in number either their built on a grave yard or theirs a problem ,,what do you think ????

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