Irish Housing Market Experiencing ‘Slow Down’

A review published today has revealed that the Irish housing market is experiencing a slow down.

The Irish Property Review has shown that the prices of houses will remain flat, after having previously being forecast growth of around 3%.

Bank of Ireland chief economist, Dan McLaughlin has predicted the rates will stop rising in autumn, at an interest rate of 4.25%.

Dr Dan McLaughlin said: “The impact of the rate cycle is clear when we look at the relationship between rents and prices. The rental market was soft in 2004 and 2005, reflecting the fact that the marginal house hunter could afford to switch from renting to buying given the interest rate backdrop.

“House prices were also expected to rise at the time, so encouraging people to buy now rather than wait. The reverse is now true: the marginal buyer is now renting, given the additional cost of servicing the average mortgage, and the view that prices are unlikely to rise sharply in the coming months.


“The result has been a rapid rise in rents, which have increased by around 11% over the past year, and static house prices.”

While rising house prices have impacted the cost of an average new mortgage, an improvement in affordability is due.

Joe Larkin, Director of Personal Lending at the Bank of Ireland also commented: “The first time buyer in particular has benefited from a combination of factors that will certainly improve affordability for them as we reach the peak of the interest rate cycle.

“These factors include increases in mortgage interest relief, the abolition of stamp duty for first time buyers, income growth circa 5% and zero property price inflation. In the short term, however, increases in interest rates have offset this benefit to some extent, with every 0.25% rise in interest rates adding circe 32 euro per month to the average mortgage of 229k euro.”

The ‘Review’ also highlights that the national mortgage book will continue to rise by 14.7% this year, which is ahead of the euro area average. Mortgage-lending growth is also currently 8.5% and due to further slow down.

(JM/SP)