The property market showed renewed signs of momentum in the first quarter, according to the latest house price index from property website MyHome.ie. Asking prices were up by 2.1% nationally with Dublin prices continuing to lag behind the rest of the country.
Davy's chief economist, Conall Mac Coille, who authored the report, said the momentum follows a fairly quiet period in the property market. "Last summer, the property market was pretty frothy. There were some big increases in Dublin. At the turn of the year, prices cooled. They were down for four consecutive months in Dublin, according to the CSO, and nationally prices haven't risen for three or four months".
"People are now seeing wage increases again and tax cuts are taking effect, which is helping incomes, and that's being used to bid up house prices. Asking prices were up in the first quarter, according to Myhome.ie Together with a lack of supply, prices are gaining momentum, but not at high levels," he explained.
The Myhome study examined the impact of the Central Bank's lending restrictions on the property market and, unsurprisingly, it concluded that the greatest impact was in the Dublin area. "We looked at transactions across the year. There were 16,000 of those above €220,000, the threshold at which the caps kick in, and 12,000 of those were in Dublin and the commuter belt. It's not surprising that inflation fell back as those rules came in. In Dublin, we saw it fall from 20% to 4% at the start of the year."
Conall MacCoille said the desired effect of the Central Bank regulations was to keep house price growth in tandem with earnings growth. "In Dublin, the average price of a three bed semi-detached house costs six times average income. In the UK, it's five times. In rural areas here, it's two or three times. Clearly, there is room for catch up. We don't want to see prices rise faster than wages. A bubble would clearly be forming if that was the case," he concluded.
MORNING BRIEFS - Ryanair has reported traffic growth of 28% in March to 8.5 million passengers. Its load factor was up 4 points year-on-year to 94%.
*** Goodbody's chief economist Dermot O'Leary believes some tweaks to the Central Bank's lending caps could help improve the housing market. In his latest economic health check, he credits the Central Bank with having succeeded in managing price expectations and preventing another housing bubble, but he believes the caps have caused pressure to build elsewhere in the economy. He favours relaxing the limits at which the higher deposit kicks in while continuing to limit loan size according to borrower income.
*** Despite the short supply of housing at the moment, construction and real estate companies continue to be an important component of the overall economy. They account for about a fifth of companies operating here according to figures from the credit risk analysts, Vision.net. They also report that the number of companies listed as trading normally here is up by 10% on the 2008 figures to just under 197,000 companies. This is accounted for by a surge in the number of start ups, coupled with a sharp fall off in the levels of insolvency - they were down 17% in the first quarter compared to the same period last year.