Tuesday 25 October 2016

Unless you've found your dream home ... there's no rush to buy

Dublin house prices have run out of steam. Depending on which set of statistics you rely upon, prices in the capital are now either falling or rising less rapidly than those in the rest of the country.

Asking prices for houses being sold in Dublin were 2.9pc higher in the first three months of this year than in the final quarter of 2014. This compares with a 4.6pc quarter-on-quarter increase in asking prices for the country as a whole, according to the most recent survey by property website daft.ie.

However, asking prices are just that, the prices sellers ask for their properties. While higher asking prices certainly reflect greater confidence among sellers they don't necessarily mean that actual prices are rising. The picture of the housing market being painted by the CSO's house price index is quite different from that being portrayed by daft.ie.


According to the CSO, house prices stalled after the Central Bank announced its intention of imposing tough new mortgage lending rules on the banks last October. The CSO's house price index, which had risen by 16.3pc nationwide and by 24.2pc in Dublin in the year to October 2014, has since fallen by 2.5pc in Dublin and by 1.4pc for the country as a whole.

When it comes to house prices it would appear that one pays one's money and one takes one's chances!

So just what is going on with house prices? Are they rising, falling or flatlining? What is certain is that transaction volumes, which had been artificially low, are very gradually returning to more normal levels. In the first three months of 2015 over 2,800 houses and apartments changed hands in Dublin, a one-third increase on the same period in 2014. New mortgage lending by the banks is also rising, but from an extremely low base. Between them, banks lent over €3.8bn in new mortgages last year - a 50pc increase on the 2013 figure - but still down more than 90pc on the 2006 peak of over €40bn.

With the domestic economy still growing strongly, unemployment falling and wages rising, it is likely that new mortgage lending by the banks will continue to increase, something which may well continue to push up house prices in the short term.

So does this mean that, with rents also going up, would-be purchasers should buy now rather than wait and run the risk of being priced out of the market?

That, as the man says, depends. The first thing ordinary buyers should remember is that, when you are buying a house or apartment, you are buying the roof over your head for the next twenty or thirty years, not a short-term asset to be "flipped" a couple of years later when prices have risen.

My advice to anyone thinking of buying is that if you find a house or apartment you can afford in an area with good shops, schools and public transport links, where you would be happy to live for the rest of your life, then go ahead and buy.

Would-be buyers who have been listening to too much hype from the property lobby about buying now before it is too late and are contemplating buying an unsuitable house or apartment in order to "get on the property ladder" should tread far more warily. Yes, there is a shortage of existing properties coming on the market and far too few new houses and apartments are being built. But, as the economy and the banking system begin to recover, both of these issues are gradually being addressed.


Based on current trends, up to 50,000 houses and apartments will be offered for sale this year - almost twice the number of properties which changed hands in 2013. While this is still short of the 65,000-100,000 properties that should be changing hands every year in a properly-functioning housing market, it's getting close.

Solving the problem of the lack of new houses and apartments being built is taking longer. There are two key issues here: the continuing reluctance of the banks to lend even to developers with good sites and the fact that over 40pc of the price of a new house goes to the state in the form of VAT and development levies.

However, with the public finances on the mend and a general election less than 12 months away, expect both of these problems to receive political attention sooner rather than later.

All of which means that, unless you have found the home of your dreams, most would-be buyers should be in no hurry to jump into the market just yet.

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