Irish house prices increase at fastest pace in three years

KBC Bank says the focus should be on 'calming' the pace of increase

Irish house prices increase at fastest pace in three years

File photo of an estate agent in Dublin city where many of the houses have been sold | Image: Sam Boal/RollingNews.ie

Updated: 21.50

A new index suggests Irish house prices increased by 13% in the 12 months to April this year.

This is the fastest pace of increase since May 2015.

This compares with an increase of 12.6% in the year to March - and an increase of 9.5% in the twelve months to April 2017.

The Central Statistics Office (CSO) say in Dublin, residential property prices increased by 12.5% in the year to April.

Dublin house prices increased by 11.7%, while apartments increased 15.9% in the same period.

The highest house price growth was in Dublin city, at 14.9%.

While the lowest growth was in south Dublin, where house prices increased by 6.9%.

Source: KBC

Residential property prices in the rest of Ireland (excluding Dublin) were 13.6% higher in the year to April.

The mid-west region showed the greatest price growth, with house prices increasing 18.7%.

The border region showed the least growth, with prices increasing by just 9.3%.

KBC Bank say this continues the trend of the rapid pace of property price growth seen through the past four years.

"The pick-up in the annual rate was centred on Dublin where growth accelerated from 11.7% y/y in March to 12.5% in April," it says.

But it says the buoyancy in prices remains broadly based.

KBC says the further pick-up in price inflation is likely to fuel talk of 'overheating' - but that, in terms of housing or lending, current levels of activity remain some distance below what might be considered normal.

"The issue is not that property sales or lending or lending levels are too ‘hot’ at present, it is that serious logjams in supply coupled with pent-up demand mean the journey to sustainable outcomes could be problematic", it adds.

It suggests because housing remains below what might be considered healthy levels of construction and lending, the focus should not be on stopping activity but on ‘calming’ the pace of increase.

"The pace of increase in Irish property prices of late likely means it remains the fastest in the EU", the bank says.

Source: KBC

The latest Eurostat release show Irish housing prices rising more than twice as fast as the average increase across the EU - which stood at 4.5% in late 2017.

This partly reflects the broader strength of the Irish economy, but also significantly reflects "a serious shortfall" in supply.

KBC says: "The key issue is to assess how to travel safely from current conditions to some higher level of sustainable level of output and lending.

"The faster the pace of journey, the greater the risks in this regard that the mix between much needed increases in the volume of construction and housing transactions on one hand and price inflation on the other is unfavourable."