The impact of the mortgage interest relief deadline on house price increases can’t be underestimated, according to the Construction Industry Federation (CIF).  The CIF was speaking after the CSO announced their third monthly increase in residential property prices in a row.  

The latest CSO figures showed that residential property prices around the country rose by 0.9% in September, following rises of 0.5% in August and 0.2% in July.  Four of the last five months figures have now recorded increases.

Dublin residential property prices also rose in September, with a 2.4% increase recorded for the month.  The previous three months had recorded decreases in Dublin residential property prices of 0.5%, 0.3% and 1% respectively.

The CIF has cautioned that the increase in prices may be correlated to the rush to take advantage of mortgage interest relief before it expires at the end of the year.  “Looking at the CSO figures will provide some hope to all those who have an interest in the residential property market,” said CIF Director General Tom Parlon.  “With three marginal monthly increases recorded in a row we may finally be at the stage where the market is beginning to turn.

“However before the housing market starts counting its chickens, it is worth noting that there has been a small surge in demand driven by the impending expiration of the mortgage interest relief payments at the end of the year.  These payments offer up to €22,500 over the next five years to a first time buying couple and up to €11,250 for a first time buying single individual.

“Sums of that level are obviously a carrot for those who are considering entering into the residential market for the first time.  But as the window for taking advantage of these payments is scheduled to close at the end of the year, this may be encouraging increased market activity at present.  In theory that may be creating a small spike in residential housing prices.

“Once these payments expire there is no suggestion that demand will continue at current levels in the new year.  Falling demand will also impact on residential property price trends.

“If the Government is committed to stopping mortgage interest relief at the end of the year it may have a negative impact on the residential market come the new year.  That could stall any upturn in house prices in the short to medium term,” Mr. Parlon concluded.