Estate agents Sherry Fitzgerald says the average price of a second hand property in Ireland rose by 7.6% in the first quarter of this year. This follows growth of 17.3% last year, which Sherry Fitzgerald says is an indicator of the continued buoyancy of demand for residential property.
The pace of house price inflation in the Dublin second hand market was notably stronger at 11.2% for the first three months of 2006. This brings the rate of increase to 30.5% for the 12 months to March 2006 and compares to a total growth rate of 23.3% in 2005.
Sherry Fitzgerald's chief economist Marian Finnegan says this is partly due to the relative poor supply of new houses in Dublin city. Though just less than 30% of the country's population live in Dublin, only 22% of total completions and 14% of house completions are being provided to the Dublin market.
Today's figures show that sales by first time buyers remained stable at 36% of all second hand properties traded in the three month period. Sherry Fitzgerald says the introduction of 100% mortgages and the elimination of stamp duty has significantly fuelled price inflation for the starter home end of the second hand market.
Investors were also relatively active so far this year with preliminary estimates suggesting they purchased 20% of the second hand properties traded so far. This compares to 19% the same time last year.
22% of traders so far this year sold with the intention of buying a larger property. The estate agents say that this is a 'very healthy' indicator of the robustness of the market. Evidence also suggests that there was a shortage of larger family homes on the market in the first quarter of 2006, a factor which also fuelled price growth.
Ms Finnegan says that one of the more important factors to influence the performance of the market this year will be interest rate cycle. Despite the recent hikes, there is still expectation of further increases of around 0.5% in the near future.
'Such an increase in the cost of borrowing money will temper consumer expenditure and therefore begin to limit the potential for price growth,' the economist says.
'The combination of this and the reduction in the gap between supply and demand will facilitate a moderate of house price growth with current estimates suggesting price inflation will average 15% during the year,' she adds.
She predicts that the greater proportion of this price growth will take place in the first half of the year, with lower growth anticipated in the latter months of 2006.