House prices across the country posted their smallest gains in six years in June as Dublin price rises all but ground to a halt with markets set to weaken further in the remainder of the year.
Data released by the Central Statistics Office yesterday showed the pace of property price gains in June eased to just 2pc from a year earlier, from 2.6pc in May, and that prices rose 0.1pc in the capital as house prices were static and apartments gained 0.1pc.
“There is now clear evidence that house price growth has fallen sharply in recent months, especially in Dublin.
“And in some areas, prices are now actually lower than this time last year,” said independent economist Alan McQuaid.
“Indeed, if we see a continuation of the recent downward trend at its current pace, year-on-year growth in residential property prices could potentially be in negative territory come the end of 2019,” Mr McQuaid added.
The number of residential property transactions fell to 3,391 in June from 3,598 in May and the total value of transactions dropped to €971.3m from €1.1bn in May, the CSO data showed.
Despite the recent decline in the pace of house price inflation, credit ratings agency Moody’s yesterday said it remained a key area of the economy to watch for signs of overheating.
“We continue to see supply shortages as the primary driver of rising prices: there was very little construction during the crisis years, with the total national housing stock growing by only 8,800 dwellings between 2011 and 2016, compared to the growth of some 225,000 units recorded between 2006 and 2011, according to the European Commission,” the agency said.
However, we are still far away from the era of peak property price excesses in the boom, with Dublin property prices 22.2pc below their February 2007 peak.
Outside the capital they are 21.3pc lower than their highest prices, according to Mr McQuaid.
Data from the Central Bank of Ireland showed despite rising employment and wages as the economy recovered from the crash, households are still showing caution over borrowing.
In the first quarter of this year, banks’ holdings of household deposits grew by 4.5pc over 12 months to almost €100bn in what was the 18th consecutive quarter of deposit growth, at a time when interest rates are close to zero.
Total lending was €88.4bn at the end of the quarter, according to the Central Bank.
Mr McQuaid said lack of supply remained the key issue for the housing market.
He added that first-time buyers continued to find prices too expensive for what they could afford.
“Subsidising purchasers through tax breaks is not the answer,” he said, in a comment on calls for the Help to Buy Scheme to be extended.
The Banking and Payments Federation Ireland lobby group this week said the programme, which provides a tax incentive of up to €20,000 on the purchase of a new-build property, should be extended beyond its planned closure at the end of this year.