Continued signs of stability in the Dublin residential property market were evident during the third quarter of the year, with the DNG HPG recording an increase in the average price of a second hand residential property of 3.1%. This was the first three month period to show an increase in the average price on the HPG since the third quarter 2006, six years ago.
The recorded increase in prices in the three months to the end of September was in stark contrast to the same period in 2011 when the average price of a resale property in the capital fell by 5.6%. Whilst it still remains too early to call the absolute bottom of the market for all property types in all areas of Dublin the latest results add further weight to the argument that the market in 2012 has proved flat in terms of price movement at the very worst and in some cases prices have moved away from their low point, at least for the time being.
Average Dublin 2nd Hand Price €250,948
Percentage Change Q3 2012 3.1%
2012 Year to date -0.8%
Annual Percentage Change -6.1%
From Peak (Q3 06) -65.0%
The latest quarterly HPG results, combined with the reduced extent of price declines seen in the first half of the year mean that the annual rate of price deflation has dropped substantially, to -6.1% over the last twelve months. This compares very favourably to the decline of 15% in the year to June and 20% in the year to March 2012.
This means that in the period January to September this year, residential property prices have, on average, remained broadly flat, with the HPG recording a slight decrease of -0.9% in the time period.
Since the peak of the market six years ago, residential property has still lost some 65% of its value.
DNG HPG v CSO RPPI
The Residential Property Price Index for Dublin property (RPPI), produced by the Central Statistics Office, continued to mirror the trend seen in the DNG HPG during Q2 of the year (the latest quarter available on the CSO series) with another decrease in the pace of price deflation. The CSO RPPI recorded a smaller decrease than the DNG HPG during the three months to June with prices of Dublin residential property declining by just 0.3% compared to 0.9% on the HPG. It would appear from the recent trend on both measures of price movement that the CSO RPPI will also record a small increase in prices for the third quarter which will prove a significantly newsworthy piece after 6 years of falling prices.
As part of the series the DNG HPG examines price movements by geographical location within Dublin and its environs.
All areas of Dublin recorded an increase in the average price of residential resale property during the third quarter, ranging from a modest increase of 1.2% on the north side of the city to 5.1% on the west side of the city. So far in 2012 prices have remained broadly stable, with the HPG recording a slight increase since the end of last year in west Dublin but small decreases on both the north and south sides of the city since the end of 2011. Of perhaps more significance is the extensive fall in the rate of price deflation over the last twelve months, averaging around -6%, compared to an average of -15% in the year to June.
Price Changes by Price Bracket
The DNG HPG measures the movement in prices for different price brackets of property within the sample.
The key figures to take from the table above, showing price movements across different price brackets, relate to price movements in the €250,000 – €500,000 range. In the year to date, properties valued in this range have risen by 0.8% on average, reflecting increased asking and sale prices for three and four bedroom semi detached homes. The majority of the Dublin apartment stock is probably now valued at less that €250,000 and hence this price bracket continues to show signs of weakness although cheaper three bedroom semi detached homes at around €200,000 did see their prices increase in the third quarter and overall the average price in this price range did increase in the three months to September.
Some positive news from the DNG HPG for the first time in six years with the average price of a residential resale property rising during the third quarter of the year. Only time will tell if this upward trend will be sustained in the medium term and only when prices have risen for several consecutive quarters can we definitively say that the market has bottomed out.
In reality, it is far more likely that 2012 will prove to be a somewhat ‘unusual’ year in the residential property market combining several unique factors that lead to a flattening out in residential property prices. Firstly the generous increase and extension of the Mortgage Interest Tax Relief for 2012 has most definitely encouraged first time buyers to make a move in the market so as to avail of seven years of mortgage interest tax relief from the date of purchase. This scheme is due to expire at the end of 2012 with no sign as yet from the Minister for Finance that it might be extended. Should it expire as planned, this will undoubtedly remove the positive impact it has had on the market in 2012.
The second factor that has caused upward price movements, albeit on a small scale, has been the severe shortage of housing stock available for sale on the market throughout the year, and this combined with a slight increase in demand has stopped the rot of price decline this year. The rise in values seen in the last three months must be placed in the context of Ireland’s wider economic fragility, where long term unemployment and emigration continue to rise, economic growth remains weak at best and consumers are bracing themselves for the introduction of a property tax and domestic water charges. Until such time as confidence returns amongst consumers and economic growth becomes more robust, residential property prices will remain weak, bouncing along the bottom of the economic cycle.
Keith Lowe CEO of the DNG Group stated that : “There is now strong evidence that property prices in the capital appear to be stabilising despite challenging conditions in the mortgage market. Notwithstanding the DNG HPG recording its first increase in 6 years property prices still remain over-corrected for certain property types and locations and it is likely that we will see some modest price inflation throughout the year for this product. The property market is still fragile with an artificially low level of transactions but there is no question that the increase in Mortgage Interest Relief in Budget 2012 has focused the mind of many first time buyers and we would call for this measure to be extended by the Minister for Finance in Budget 2013. Our agency have also experienced a marked increase in transaction levels this year not just in Dublin but in many key cities and towns outside the capital with a particular increase in cash transactions which now exceed 1/3 of all sales in our network”