A slowdown in mortgage lending towards the end of the year is putting a stop to house price inflation in Dublin and surrounding areas, the Q4 Irish Independent REA Average House Price Index has found.
The availability of finance in the market in the latter half of the year is causing what some agents term the Q4 effect, with mortgage lending significantly slowing and buyers complaining that they cannot secure funding for obscure reasons.
The price of a three-bed semi-detached house in Dublin city has increased by just 1.6% in the last 12 months as the Central Bank’s borrowing rules increasingly define affordability in the housing market.
And the capital’s postcode districts saw an increase of just 0.4% in the final quarter of the year compared to 1.5% in the corresponding period in 2017.
One agent, REA Fitzgerald Chambers in Stoneybatter, reported that average prices dropped by €20,000, or -5%, in the final quarter of the year, with average sales times increasing from four to eight weeks.
After rising by 12.5% in 2017, the average price of a second-hand semi-detached house in the capital has increased by just over €7,000 this year and now stands at €445,167.
In line with the rest of the country, the Dublin market has become price sensitive with prices in the north of the county rising by 4.9% to €322,500 in the past 12 months – but remaining static in Swords, Skerries and Balbriggan in the final quarter.
This is in contrast to South County Dublin where prices rose 0.2% on the quarter but have risen by just 0.9% this year, with the average three-bed semi selling for €411,000, and the time taken to sell rising from six to seven weeks.
The Irish Independent REA Average House Price Survey concentrates on the actual sale price of Ireland's typical stock home, the three-bed semi, giving an up-to-date picture of the second-hand property market in towns and cities countrywide to the close of last week.
“Across the board, agents are reporting that the supply of finance to the market has decreased as banks use up their exceptions to the rules in the early part of the year,” said REA spokesperson Barry McDonald.
“There is a marked decline in the amount of cash buyers in the market – down from 27% to 19% – and that is increasing the influence of the Central Bank’s mortgage lending restrictions on the market.
“There seems to be a direct correlation between enquiry levels and the difficulty in obtaining mortgage approvals, and we have seen time taken to sell rise from five to seven weeks as the year has gone on.
“The second-hand market has become extremely price sensitive across the country and it is the areas with quality housing stock available for under €270,000 that are achieving highest growth.
“Once again there is a drop-off in viewings for four-bedroomed housing in certain areas where they are priced over €400,000, illustrating the influence of the Central Bank rules.”
One agent, REA Sothern in Carlow, is forthright in their description of buyer financing in the marketplace.
“It appears that the lending institutions have used their quotas for the year and are stringing out loan application processes,” said Harry Sothern.
“Sales have fallen through when pre-approved purchasers failed to obtain their mortgage approval.”
The average semi-detached house nationally now costs €236,287, the Q4 REA Average House Price Survey has found – a rise of 0.6% on the Q3 2018 figure of €234,284.
Overall, the average house price across the country rose by 4.6% in 2018 – a decrease on the 5.4% recorded to September and indicating that the market is continuing to steady after an 11.3% overall rise in 2017.
Growth in the commuter counties also slowed to 0.38% in the last three months – an annual rise of 4.18% – with the average house now selling for €249,472.
This is an annual rise of €10,000 and growth of €2,000 in the last three months.
The country’s major cities outside Dublin recorded the biggest rise of the quarter at 1.25%, an annual increase of 5.81%, with an average three-bed semi costing €252,500.
The biggest urban rise was seen in Galway City, where selling prices rose by 2.7% in the quarter to €282,500 – a yearly increase of 9.7%.
“The Galway city market remains buoyant, however it is taking a longer to get sales closed, with average time to sell rising from four to seven weeks in the final quarter,” said Kevin Burke of REA McGreal Burke.
“At the higher price points, sales are slower as the number of cash buyers has dropped from 15 to 10% over the course of the year.”
The price of housing in Waterford City, at €210,000, is one of the reasons for its 2.4% rise in Q4, and 7.7% annual increase, according to Barry McDonald.
“Our agents REA O’Shea O’Toole report that demand continues to be strong and asking prices are being exceeded by competitive bidding., with properties achieving sale agreed status within four weeks of being put on the market,” he said.
“Prices have stayed static in Limerick City in Q4, with its average selling price of €200,000 representing a 4.2% increase throughout 2018 and local agent REA O’Connor Murphy stating that an increase in new developments has stabilised the second-hand residential market.
“Cork has experienced the slowest growth of the four, up 2.4% annually, with an average price of €317,500 remaining static in the past three months and agents reporting a limited supply of three-bed semis in mature and popular residential areas.”
The highest annual increases (7.7%) were once again seen in the rest of the country’s towns which rose in selling price by an average of €10,000 in 2018 and which experienced a 0.85% rise in Q4 to an average of €157,717.
“In these areas you largely have the perfect storm of affordability within the 10% deposit range, and no new homes as it is still uneconomical to build in many places,” said Barry McDonald.
“For example, our agents Coyne & Cuddihy in Killarney report an excellent market for new semi-detached houses up to €250,000, but there is little supply as prohibitive land costs and taxes ensure builders cannot produce houses at this price.
“Brexit uncertainty has also had a major effect in some parts of the country, and in holiday home areas such as Killarney and Bantry buyers in the over €500,000 category are hedging their bets on a rise in sterling if there is no hard Brexit, which could give them 15% increase in value.
“The highest rate of increase in the rest of the country in Q4 came in Longford, where prices rose by 5% to €105,000, giving an annual increase of 16.7%.
“However, as local agent REA Brady state, Longford is still one of the cheapest places in Ireland to buy property, with lots of head room for further price increases.
“The highest annual gains in property came in Laois, which rose 18.2% from €165,000 to €195,000, but which was static in Q4.”
There was also a slowdown in the purchasing of new homes in Dublin in Q4, according to REA agent Paul Grimes.
“New homes were slower than the previous quarter due to increased supply, astute purchasers, and lending exceptions having been reached.
“We are seeing these conditions in far greater volume than in previous years which suggests a changed landscape.
“Construction costs are continuing to climb with workforce availability under increasing pressure, thus putting upwards pressure on new homes’ pricing.”
