House prices see fastest annual increase since May 2015

KBC says the gap between demand and supply is unlikely to close in the short-term

House prices see fastest annual increase since May 2015

File photo of homes for sale signs | Image: Sam Boal/Rollingnews.ie

New data has shown Irish house prices increased by 12.7% in March - the fastest annual increase since May 2015.

The figures from KBC indicate while the gains are broadly based, Dublin is still outperforming other areas.

It also says the gap between booming demand and sluggish supply is "unlikely" to close in the short-term.

While the monthly increase of 0.7% in March appears relatively modest compared to the trend seen through the past 12 months, this is at least partly a reflection of a seasonal tendency towards smaller monthly increases in the early months of the year.

Source: KBC

The annualised rate of increase in the past three months is in the region 13%, implying that current momentum in property prices "remains formidable", the bank adds.

KBC says: "The rising trend in house price inflation of late has occurred in spite of a modest improvement in supply as new output in 2018 is still expected to be at least a third below the level needed to meet ‘normal’ demand.

"However demand at present is well above normal levels, reflecting the emergence of pent up housing needs which had built up substantially through the past seven or eight years.

"While the gap between demand and supply should close, this process is unlikely to be smooth or speedy, implying continuing upward pressure on prices in the near term."

It also says the intensity of pressure on Irish house prices "continues to reflect regional differences in demand and supply conditions".

In particular, there are notable variations in the strength and spread of 'local' economic activity.

Source: KBC

The cumulative increase in property prices since January 2010 is notably greater in the capital - but the current pace of increase around the capital is still broadly comparable with most other parts of the country.

Only in the case of the west and mid-east areas is there an indication that a 'catch-up' is now underway.

KBC says in these areas, the catch-up is likely due to a spill-over from urban centres driven by affordability constraints.