Property prices in Ireland increased by 7.3% nationally in the year to September 2016, up from the 6.8% recorded the previous month, the latest index data shows.
In Dublin property prices increased by 5.4% year on year with houses up 5.7% and apartments up 6%, the data also shows. When Dublin is excluded from the calculation then house prices in the rest of Ireland increased by 11%.
This is a reversal with Dublin previously leading the price growth. However, prices in Dublin have recorded a 145% increase in their rate of price growth since September 2015, the figures from the Central Statistical Office show.
The Midland region showed the greatest price growth, with house prices increasing 15% with the Mid-East region showed the least price growth at 5.3%.
Despite the recover in the housing market the national index is still 33.1% lower than its highest level in 2007. Dublin residential property prices are 33.5% lower than their February 2007 peak while in the rest of Ireland they are 37.5% lower than their May 2007 peak.
From the trough in early 2013, prices nationally have increased by 46.9%. In the same period, Dublin residential property prices increased by 62.7%, while residential properties in the Rest of Ireland index increased 43.8% from their lowest point.
In September the average price paid by households was €253,268 but the CSO report points out that this is a simple and can vary considerably from month to month as the mix of properties sold changes. The average price over 12 months is a more stable measure of average price and in the year to August 2016 the average market price paid was €233,984.
In the year to September the average price paid in Dublin was €383,451. Of the four administrative areas of Dublin, Dún Laoghaire-Rathdown was the most expensive with an average price of €539,334 and South Dublin was the least expensive with an average price of €305,244.
After Dublin, the next most expensive region was the Mid-East, where the average market price was €237,900. Within the Mid-East, County Wicklow was most expensive with an average price of €314,686. The least expensive was the Border region with an average price of €112,615 and the least expensive county was Longford in the Midland region with an average price of €84,279
John McCartney, director of research at real estate firm Savills believes that investors are behind this dramatic rise in prices. ‘The notion that mortgage restrictions could contain house price growth in the long term never made sense. Initially the Central Bank rules prevented some people from buying and caused a temporary slowdown in the market,’ he said.
‘But the frustrated buyers were simply pushed into renting which has driven up rents. What we are now seeing is a resumption of price growth as investors are being attracted into the market by ever higher rents,’ he explained.
He pointed out that according to index data from Daft.ie Dublin rents are now rising at 12.1% per annum and rents increased at their fastest ever quarterly rate in the third quarter of 2016 and there has been a massive tenure shift from owner occupation towards renting.
Indeed, owner occupiers fell from 69.4% of Dublin households in the first quarter of 2011 to less than 61% in the second quarter of 2016. Conversely private renters increased from 17% of households to 24.5%.
The share of properties being bought by investors remains very high, he said. Of the 13,031 properties bought in Dublin over the last 12 months some 3,760 or 29% were purchased by investors and this is backed up by the fact that apartment prices are rising faster than houses.
Looking ahead McCartney expects a further pick up in house prices. ‘Our research shows that, with demand vastly outstripping the supply of rental properties, rents are set to keep rising. This will lead to intensified competition between investors looking to buy properties and will drive further price growth,’ he said.
‘In addition the inflationary effects of the recently introduced Help to Buy scheme, which are not yet reflected in the statistics, will eventually also contribute to faster house price increases,’ he added.
