HOUSE PRICES WILL continue to rise in 2016 but not at the “unsustainable pace” that was seen over the last few years.
That’s according to the latest property report from MyHome.ie which is predicting a 5% rise in house prices this year.
The Q4 2015 report notes that there has been a slowdown in house price rises in the second half last year, with author Colm MacCoillewelcoming this development.
“The Central Bank’s mortgage lending rules appear to have prevented home-buyers from taking out ever-higher leveraged mortgage loans, thus limiting the pace of house price inflation,” he says.
Despite this, MacCoille argues that personal incomes rises will mean that house prices will keep going upwards, even if it is at a gradual rate. A recent IBEC survey indicated that 71% of companies expected to increase basic pay by 2% in 2016.
Income growth is now accelerating, driven by public and private sector wage increases, tax cuts and the introduction of a higher minimum wage. The lack of supply in many urban areas also remains acute. So a single-digit gain in Irish house prices, close to 5% seems likely through 2016.
The MyHome.ie report notes that house prices in Dublin are slipping and are becoming more in line with the rate outside the capital. Asking prices in Dublin, for example, fell in both final quarters of 2015.
This trend is predicted to continue next year with house price inflation outpacing the capital.
This is perhaps no bad thing, as MacCoille explains, with analysis showing that prices in Dublin are much more unaffordable relative to income.
The median asking price for a three bed semi in Dublin is €275,000 which is six times the average income of €45,600. In contrast, house price to income multiples in many other areas are still in the range of three to four, so looking forward there is probably more room for prices to catch up outside Dublin.
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