The Central Statistics Office (CSO) has released its Residential Property Price Index for the month of September. At a headline level, property prices increased by 0.9% during the month. This represents the third consecutive month of growth, the first time since early 2007 that prices have risen in three successive months. Despite this recent improvement, national property prices are still 9.6% lower than year-earlier levels, however, this represents the slowest annual pace of decline since October 2008.
Analysis: The data reveal divergent trends across the country. The Dublin market performed quite strongly during September (+2.4% mom, the best monthly outturn since August 2006), while property prices decreased in the rest of the country (-0.1% m/m).
Nationally, property prices have fallen 50% since the peak in 2007. To date, the correction has been sharper in Dublin (-56%) compared to the rest of the country (-46%). For some time we have argued that Dublin’s relative underperformance was unlikely to endure given: (i) the much tighter supply of housing stock in the capital; (ii) evidence that Dublin is far out-pacing the rest of the country in terms of the recent pick-up in transaction volumes; and (iii) the more attractive yields on offer in Dublin relative to other areas, which is partly a function of the greater adjustment experienced to date in the capital. While we would be loath to read too much into one month’s data, we nonetheless suspect that the above factors played a role in September’s positive outcome.
Conclusion & Action: Recent house price trends provide comfort to our view that, after four consecutive years of double-digit price declines, the worst is over for the Irish housing market. In saying that, the outlook is far from uniform. Our sense is that the Dublin market has bottomed but risks lie to the downside in rural areas, where oversupply is a concern.
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