Property prices still rising despite Central Bank’s lending curbs

Property prices continue to rise at more than 1pc per month, despite the lending measures introduced by the Central Bank to cool the market. Figures released by the Central Statistics Office (CSO) show national price hikes of 8.9pc year on year – and 1.3pc in September. Meanwhile, in Dublin, residential prices rose by almost 1pc (0.9pc) – up 6.5pc on September last year. The latest month’s data is comparable to the 1pc-plus increases during the boom years.
More worryingly, Dublin house prices (not including apartments), which the Central Bank measures were designed to cool, rose 1.1pc in September. Demonstrating the pace of different markets, outside of Dublin, prices rose even higher, by 1.6pc and up 11.4pc on September 2014.  However, national residential prices are still now 34.6pc lower than at their peak level in 2007, while Dublin prices remain 33.7pc lower. The CSO data demonstrates an erratic year for property prices, which previously increased in August by 2.3pc, in July by 0.9pc and in June by just 0.1pc. In contrast, in January and February, national prices went down by 1.4pc and 0.4pc respectively. This indicates that, despite irregular progress, prices have generally been increasing by greater amounts as the year has progressed. This would appear to indicate that the increases, particularly in Dublin, are a sign that bank lending restrictions in the absence of supply increases are not working.
John Lowe, The Money Doctor feels that if the Central Bank had let prices increase, then homes would have reached a level which would have caused builders to re-enter the market. The knock on effect of course is that rents continue to rise as the scarcity of building continues. The Central Bank restrictions on house deposits (20%) and income requirements (3.5 times income) are also still major factors in the equation.