April Data Hint At Some Easing In Irish Property Price Inflation

5/27/15

This is the first in a series of short commentaries on significant Irish economic data and developments.

Official data show Irish housing prices rose modestly by +0.6% on a monthly basis in April. Coming after a slightly larger monthly gain in March, these point to continuing positive momentum in prices. This also suggests the softness in prices seen in January and February may have reflected seasonal factors as well as uncertainty related to the precise form Central Bank proposals on Loan to Value and Loan to Income limits would take when implemented (these price data are based on mortgage drawdowns and, as such, typically reflect transactions agreed a couple of months earlier).

The continuing upward trend in property prices is entirely consistent with signs of a broadening of the upswing in the Irish economy. In this regard, it accords with the further improvement in employment reported last week and particular aspects such as the increased incidence of full-time jobs growth that might be expected to bolster major purchases such as property.

The persistent buoyancy of Dublin housing price data reflects ongoing constraints on supply and is also consistent with the geographic split of the recent jobs data that point towards particularly strong growth in employment among households proximate to Dublin. This likely owes something to a spill-over caused by pricing/supply constraints in Dublin which also is partly responsible for the momentum in prices outside the capital. However, the more generalised improvement in Irish economic conditions now emerging is also driving this increase.

Today‚Äôs data also hint at a clear easing in the underlying pace of Irish house price inflation- the annualised monthly change over the past three months is +4.5% compared to a twelve month rate of increase of +15.8%  (+16.8% in March). We would expect modest monthly changes in coming months to produce a significant easing in the annual rate of increase as 2015 progresses. Some increase in supply as well as new Central Bank ceilings on LTV and LTI limits will act as constraining factors on prices, particularly compared to the outsized gains seen through the middle of 2014. However, stronger domestic spending power, growing consumer confidence and the increased availability of credit mean the trend in Irish property prices continues upwards albeit at a more modest pace.
 
Irish Residential Property Price Data: April
  monthly change annual change cumulative fall since peak (all %)
Nationwide +0.6% +15.8% -37.8%
Dublin +1.0% +20.2% -38.1%
of which      
houses +1.0% +19.6% -36.3%
apartments 0.0% +26.4% -42.2%
Rest of Ireland +0.3% +11.4% -41.4%
 



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