Property run will be reined in, say experts
Prices jumped by 16pc last year, but new lending rules will curtail rises
Property prices continued to surge in the final months of last year, but new mortgage caps are expected to have a dampening effect on the market.
New figures show that prices rose by 16pc across the State in the 12 months to December, and by 23pc in Dublin. Property experts expect rises of between 5pc and 10pc this year.
Prices nationwide were up by 0.4pc last month, compared with an increase of 0.5pc in November and a rise of 0.3pc for the same month a year earlier.
For Dublin, the month of December saw rises of 0.2pc, according to the Central Statistics Office.
Apartment prices in the capital were 21pc higher than a year previously. However, the number of mortgages being issued for apartments remains low.
Property prices outside of the capital rose by 0.7pc last month. Prices were 10.2pc higher than in December 2013.
The average house nationwide is now changing hands for €208,000, according to calculations based on the CSO figures by Goodbody Stockbrokers.
However, the figures only include transactions where there is a mortgage. Cash purchases are excluded.
In Dublin, the average price is now €282,000, according to the Goodbody calculations based on the CSO figures.
Outside Dublin, properties have an average value of €166,000.
Economist with Goodbody Dermot O'Leary said the new mortgage caps being introduced by the Central Bank will have a dampening effect on the market, although not as bad as initially feared.
Mortgage approvals under the old mortgages rules would still be in place for six months, Mr O'Leary said.
This means it could be months before we see the actual impact in the official numbers.
The IBEC group Property Industry Ireland (PII) said the latest house price data and the announcement of the Central Bank's new mortgage lending policy showed that affordability would be a key issue for the sector this year.
PII director Peter Stafford said: "While house prices rose 16.3pc nationwide, across regions price trends vary considerably.
"This is down to local economic conditions and different supply and demand needs."
Economist with Merrion Capital Alan McQuaid said the underlying housing market is a lot stronger than the official data suggests as the CSO figures are based on mortgage draw-downs and don't include cash transactions.
He said the generally improving economic backdrop should help to sustain the house price recovery in the short-term even with credit restrictions.
"Taking all the factors into consideration, an increase of 10pc is projected for 2015," he said.
Estate agency DNG predicted property price growth of 5pc to 10pc this year.
Chief executive of DNG Keith Lowe said: "It is clear that whilst the property market in Ireland is showing signs of recovery, it is still not operating normally.
"Transactions per population were estimated by DNG Research to stand at 2.9pc in Q4 2014 versus 3.5pc for Northern Ireland and 4pc to 5pc for England, Scotland and Wales for the same period."
He said prices have risen very strongly in the sub-€250,000 price category in the last 12 months which is been mainly fuelled by strong demand from investors purchasing entry level homes suitable for investments, such as city apartments.
What they said
"I don't dispute the loan-to-income ratios are not liberal. They will certainly affect many people, but will prevent people from getting over-indebted."
- Patrick Honohan, Central Bank Governor
"This was a mis-step by the Central Bank. They have brought forward a solution to a problem that does not yet exist. Prudent lending policy is a very healthy regulatory option for a functioning housing market. However, implementing this approach when house building was just starting to recover is putting the cart before the horse."
- Tom Parlon, Construction Industry Federation
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"The new rules are likely to result in more people renting because they cannot afford to buy and this will push rents up further."
- Simon Stokes, the Society of Chartered Surveyors Ireland
"There is a very significant issue here. A lot of people who expected to buy will be renting. Rents are spiralling out of control and this will put pressure on housing."
- Senator Aideen Hayden, chair of housing charity Threshold
"The new rules are very crude... No one is arguing that at certain times when there is an overzealous market that measures should be introduced. This, however, is not the time. The market is far from heating up."
- Rachel Doyle, financial brokers group PIBA
"Initiatives to prevent a housing bubble should not be at the expense of regions, which are only now starting to see new building taking place, or first-time buyers and tenants in cities who struggle to raise a deposit... If there are continued shortages of housing in high-demand areas, it will both undermine quality of life and Ireland's competitiveness."
- Peter Stafford, Property Industry Ireland (part of IBEC)
"It is not the perfect solution, especially for young people looking to buy in Dublin, but should help people looking for a home in the Midlands where, thankfully, prices are lower."
- Gabrielle McFadden, Fine Gael TD for Longford/Westmeath
"The rules will favour better-off families where parents have the financial strength to support their children and they will confine many, unwillingly, to renting for long periods, pushing up rental costs further."
- Pat Davitt, Institute of Professional Auctioneers and Valuers
"tHIS could result in an entire generation of people being trapped in houses and apartments which are no longer suitable for their needs."
- Michael McGrath, Fianna Fáil finance spokesman