Houses earning more than people living in them but government denies ‘boom’
By Bernard Purcell
Ireland’s houses are earning more than the people living in them as shortages and relaxed lending rules send prices soaring.
Two new reports showed the price of an average house in Dublin rose by as much as €19,000 in the first three months of this year – or €65,000 in the past four years. Across the country the rise was €12,000 in the same first quarter.
The dramatic surge in prices is because of the acute housing shortage, new buyer incentives and a relaxation of tightened borrowing requirements imposed by Ireland’s Central Bank after the country’s spectacular property crash. The government minister responsible for housing, Fine Gael leadership hopeful Simon Coveney, was forced to publicly declare on Monday that Ireland is not returning to the Celtic Tiger madness of ‘boom and bust’.
Housing Minister Mr Coveney – who is vying with Cabinet rival Leo Varadkar, Ireland’s Social Protection Minister, to take over as party leader from Taoiseach Enda Kenny – said Ireland will not allow a repeat of the situation in which people were encouraged to borrow “ridiculous amounts of money” to buy property. He was speaking as two major reports by My-Home.ie and Daft.ie showed rapidly rising property prices are likely to hit double-digit inflation.
Both reports directly linked the latest price acceleration to the Irish Government’s recently introduced tax incentives for first-time buyers and a loosening of the Central Bank’s mortgage lending rules.
MyHome’s report, produced with stockbroking firm Davy, suggested annual house price inflation is running at 9 per cent nationally and at 10.2 per cent in Dublin, where shortages are greatest. A year ago house price inflation in Dublin had stalled and dropped to just 1 per cent. MyHome said the average asking price across Ireland in the first three months of this year was €239,000, up €12,000 on the previous quarter, while the figure for Dublin was €347,000, a rise of €19,000.
Daft said house prices rose by an average of 4.3 per cent during the first three months of the year, the largest quarterly increase in nearly two years. It said the average price of a house in the State was now €230,000, some 9.4 per cent higher than this time last year, and more than €65,000 higher than four years ago.
Year-on-year price increases in Dublin were 8.7 per cent compared to annual inflation of just 1.2 per cent. It said the cost of homes in Dublin rose by an average of €17,500 in the first three months of 2017, and by €120,000 in the last five years.
South County Dublin is the most expensive place in Ireland to buy with average asking prices of €548,000.
Prices rose rapidly in Ireland’s other four main cities: In Galway and Limerick, average asking prices were 16 per cent up on last year, while in Waterford and Cork prices were up 13.9 per cent and 10.7 per cent.
Daft.ie said the number of properties on the market is at a record low, with just 20,500 properties for sale nationwide this month – the lowest ever since it started in business ten years ago at the peak of the boom.
Asked on RTE radio news if Ireland had forgotten the lessons of the past and is heading for another “boom and bust” cycle, Mr Coveney said: “No, absolutely not and we need to make sure that doesn’t happen.”
He said the core issue was the dramatic housing shortage in several parts of Ireland. The Irish government, he said, was tackling that: “Last week, we announced €226 million of targeted infrastructure funding to open up large housing sites that will deliver 23,000 houses in the next three to four years. It would be wrong of me to say that there aren’t real pressures on the system – of course there are, and we’re not going to fix the housing pressures overnight.”
Author of the Daft.ie report report’s Trinity College Dublin economist Ronan Lyons said: “It is unfortunate that the primary focus of policy efforts late last year, when it came to the housing market, was to further stimulate demand and prices, rather than supply and quantities.
“Adding up the four components of demand – obsolescence, falling household size, natural increase and net migration – it is clear that the country needs at least 40,000 and in reality probably 50,000 homes per year.” The number of new homes actually being built is barely a quarter of that, he said.