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House Asking Prices Pushing Inflation To Two-And-A-Half-Year High

By News
10 hours ago
Est. Reading: 4 minutes

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Home concept, Home savings, Selling home, Money and house, Business and finance concept Money and House, saving money to build a house

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Rising levels of homeowner debt, along with falling interest rates, are set to drive continued fierce competition in the market and put more upward pressure on home prices this year, according to the latest quarterly house price report from MyHome in association with Bank of Ireland.  

The report notes that the average mortgage loan for property purchase was €308,200 in Q3 2024, which is up 7% on the year and is the first time it has exceeded €300,000. First-time buyers are now two years older than their UK counterparts on average (36 vs 34) and are taking on more debt relative to income than them for the first time since the Celtic Tiger years. 

The MyHome report for Q4 2024 found that annual asking price inflation was 8.4% nationwide. The last time this annual figure was higher was in June 2022, when inflation was 10.9% nationwide. Annual asking price inflation in Dublin is now 5.9% and the rate has accelerated to 9.8% in the rest of Ireland.  

Meanwhile, the report found asking prices nationally rose by 0.4% on the quarter and fell by a marginal 0.1% in Dublin.  

This means the median asking price for new instructions nationally in the quarter was €365,000. In Dublin it was €450,000. 

Main Findings

  • National asking prices up 8.4% over the year, the highest rate of annual inflation since summer 2022 
  • The average mortgage loan for house purchase has exceeded €300,000 for the first time and is up 7% on the year 
  • First-time buyers taking on more debt relative to income than UK counterparts for first time since Celtic tiger years 
  • The average residential transaction now being settled for 9% over the asking price, with one in seven homes still settling for a minimum of 20% over the asking price 
  • Falling interest rates will help affordability, but this may be diluted by homebuyers bidding up house prices 
  • Forecast is for 4% rise in Irish house prices in 2025

 

Other findings include:

  • Central Bank data shows the average first-time buyer purchase price was €375,000 in H1 2024, up 6% on the year; one-third (or €7,300) of which was accounted for by larger deposits. 
  • First-time buyers are getting older on average, aged 36 in H1 2024, up from 34 in 2020.  
  • With limited homes for sale, any initial improvement in affordability from falling interest rates may be diluted by homebuyers bidding up house prices.   
  • Only 17% of residential transactions were settled at a discount to the asking price in November. 
  • While the market is very tight, overall transactional activity remains close to its highest level since the Celtic tiger era. 
  • The average time to sale agreed was just three months in Q4, close to a historic low.  
  • There were 6,400 new homes listed for sale in the first nine weeks of Q4 2024, up 8% on the same period of 2023. 
  • Housing completions in Q3 2024 were up 6% on the year to 8,900 so our forecast for 33,000 completions in 2024 is on track.  
  • Rental price inflation for new tenancies has cooled off, falling to 4.7% in Q2 2024, the softest pace in three years. 

 

Analysis: 

The author of the report, Conall MacCoille, Chief Economist at Bank of Ireland, said: “The message from this report is that pricing has retained its momentum, and has still not softened even as affordability has become stretched through 2024.  

“Demand is still fierce in the market and indeed has strengthened as the year has gone on. This demand has been impacted by rising mortgage approval values, and the first-time buyer market is particularly hot.  

“Household savings are playing their part in this demand; new Central Bank data show the average first-time-buyer purchase price was €375,000 in H1 2024, up €21,000 (or 6%) on the year, two-thirds of which was accounted for by mortgage debt, but one-third (or €7,300) by larger deposits.  

“First-time-buyers are also taking on more leveraged loans, an average loan to income (LTI) ratio was 3.37x in H1 2024 compared with 3.25x in H1 2023. This is the first time since the Celtic Tiger years that the first-time buyer ratio is greater than that of the UK, where the LTI is currently 3.31x. This follows the loosening of the Central Bank mortgage lending rules and reflects greater numbers of first-time buyers just below the 4x threshold.  

Mr MacCoille said that, prior to relaxation of the Central Bank rules, close to 60% of first-time buyers had a mortgage loan just below the 3.5x LTI threshold. In the first half of 2024, close to half of first-time buyers had mortgage loans with an LTI ratio just below 4 times their income.  

“There are some modest signs of improvement. There were 6,400 new homes listed for sale in the first nine weeks of Q4 2024, up 8% on the same period of 2023 and housing completions in Q3 2024 were up 6% on the year to 8,900.  Of course, the acid test will come in the spring, as new listings tend to start to accelerate ahead of next summer,” he said.   

“ECB rate cuts this year will also support house prices. However, with limited homes for sale, any initial improvement in affordability may be diluted by homebuyers bidding up house prices.    

“Looking ahead to the rest of the year, the outlook is extremely uncertain. For now, we are sticking with our forecast for 42,000 housing completions next year, rising to 45,000 in 2026. We also expect a 4% rise in Irish house prices. However, if anything this view could be too conservative.” 

 

Joanne Geary, Managing Director of MyHome, said: “Our latest report shows the extent of the demand in the property market, with residential transactions on average being settled at 9% over the asking price and annual asking prices nationwide at their highest level since summer 2022.  

“In our last report, we noted that Ireland would need an additional 200,000 homes to match the UK’s housing to population ratio. This time, we drew the comparison on the demand side, with first-time buyers here now taking on more debt relative to income than their UK counterparts for the first time since the Celtic tiger era. 

“As we look to the rest of the year, a key metric to watch will be housing completions. Given we do not see any short-term easing in demand, it underscores the importance of increasing our stock levels.”  

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