Borrowing costs

House price inflation slows again as rising borrowing costs cool market – The Irish Times

House price inflation continues to subside as rising interest rates and cost of living pressures dampen demand. The latest figures from the Central Statistics Office (CSO) show that the rate of price increase – in annual terms – fell to 12.2% in August, from 13% the previous month, continuing a decelerating trend seen in recent last months.

Year-on-year inflation in Dublin fell to 9.7% from 10.4%, while price growth outside the capital fell to 14.2% from 15.2% in July.

The latest figures from the CSO also detected a drop in transactions. According to the agency, 4,295 home purchases by households were filed with the tax authorities in August. This is a decrease of 3.3% compared to the previous month. The total value of transactions for the month of August was 1.6 billion euros.

Price growth in the state’s housing market had followed a steep upward trajectory during the pandemic, fueled by factors such as increased savings, remote working and lower-than-expected supply.

However, greater inflationary pressures and the prospect of higher borrowing costs due to interest rate hikes by the European Central Bank halted this trend. Rising borrowing costs are expected to trigger a rapid cooling in property markets around the world and a potential painful correction in some of the most overvalued markets.

Data from the CSO indicated that households here paid a median (average) price of €295,100 for a property in the 12 months to August this year. The Dublin region had the highest median price (€420,000) and in the capital, Dún Laoghaire-Rathdown had the highest median price of €615,000. The highest median prices outside Dublin were in Wicklow (€415,000) and Kildare (€357,500), while the lowest were €149,500 in Longford.

The CSO said the value of its residential property price index in August, at 167.2, was 2.2% above the peak of the housing boom in April 2007. However, real house prices real estate are not yet at the level recorded in 2007 before the market collapse. .

“We expect to see a further slowdown in price growth in the coming months as the volume of homes for sale finally begins to pick up,” said Trevor Grant, chairman of the Association of Irish Mortgage Advisors, noting that there were 15,300 second-hand properties. for sale nationwide in July, representing an annual increase of 1,800 properties.

“It should be noted, however, that a reduction in house price growth is millions of miles away from falling house prices. We’ve really only had one period in living memory, during the 2008 financial crisis, when we saw real reductions in property values,” Grant said. “It was driven by a prolonged period of easy credit, followed by an extremely severe recession, when unemployment soared. We haven’t had any such credit since and no one seems to be predicting a spike in unemployment, so it’s hard to see what could drive house prices down in the months ahead.