Daft.ie has released its latest House Price Report showing that nationally the asking prices for second hand homes has risen by an average of 8.5 per cent in 2015.
Daft’s chief economist Ronan Lyons suggests that the differing fortunes in house prices for Dublin and the rest of Ireland are partially explained by the impact of new lending caps announced last January by the Central Bank, require most mortgage holders to provide up to 20 per cent of the purchase price.
“The dramatic slowdown in Dublin house prices in 2015 shows how effective the Central Bank rules have been. This has not been the case elsewhere in the country as house prices are lower relative to incomes and thus the new rules have not been as binding,” said Mr Lyons. The report highlights that National house asking prices rose last year by an average of 13.1 per cent excluding Dublin.
Economists are well known for talking in terms of supply and demand. But supply and demand are really only half the story.
The national average asking price for a house in the last three months of 2015 was €204,000, compared with €188,000 at the end of 2014 and €164,000 at the market trough in early 2013.
On the capping of rent prices Mr. Lyons stated, “Capping rent increases is understandable. But it falls into the trap of thinking that prices are the problem and thus price controls are the solution. Prices are a signal and they have been signalling very strong demand for nearly four years now in Dublin – and for nearly two years elsewhere. If we are not seeing new supply being built, then we need to understand why costs are so high, rather than banning rent increases and hoping the problem goes away. While it may not be glamorous and it will certainly not be an overnight solution, the first step to tackling the lack of supply is a Government-sponsored benchmark of construction costs.”