Residential property prices increase by 13.4% y/y in July

The latest Residential Property Price Index release from the CSO shows that Irish residential prices rose 13.4% y/y (+2.0% m/m) in July.

This move represents the highest annual rate of change in prices since April 2007.

 

The largest increase in July was in the Dublin market (+23.2% y/y and +2.7% m/m), where ongoing supply shortages and superior economic fundamentals are combining to push prices higher. The latest move means that Dublin prices have now increased by 33.7% from their trough but are still 43.0% below peak levels.

Prices in the rest of Ireland were +4.9% y/y and +1.3% m/m in July, which extends the run of growth on a y/y basis in this index into a seventh month. Prices outside of Dublin have increased by 7.0% since the trough but are still 45.1% below the peak.

There is a sense of déjà vu about the above moves, given the well-documented two-speed (Dublin prices have posted 12 successive months of double-digit gains on a y/y basis) recovery in residential prices in Ireland. While prices outside of the capital have pushed higher since the start of the year, an overhang of excess units in some local markets means that the ‘National ex Dublin’ price index is likely to continue to lag Dublin for the foreseeable future.

The recently published quarterly report on the Irish rental market from the country’s largest property website, Daft.ie, showed that rental yields in Q2 ranged from 5.4%-8.0% across the capital and from 6.3%-7.4% across Ireland’s other main cities (Cork, Limerick, Waterford and Galway). Given that these yields stand well above the cost of funding, the muted new supply coming on stream (only 3,941 units were completed in the first five months of 2014, which equates to 0.2% of the national housing stock) and the supportive demand dynamics (ongoing new household formation and economic recovery), we see few barriers to further residential price appreciation from here.  Source: Investec