Property Prices Record Surprisingly Strong Gain in August


Out-sized monthly gain doesn't alter picture of gradual easing in pace of property inflation.

Stronger economy and supply constraints still key influences on market conditions.

According to just-released data from the Central Statistics Office, Irish residential property prices rose by 2.3% month on month in August, the largest monthly gain since last October.
We still think a trend easing in the pace of property price inflation is under way but the combination of strengthening domestic economic conditions and a lack of supply in key segments means this is likely to be an extended and uneven process. In circumstances where potential demand continues to outstrip supply, property prices should remain underpinned even if the rate of inflation eases towards a more sustainable pace which we reckon is probably in the 3-5% range. 

The monthly rise in prices in August was very strong outside the capital but the increase in Dublin house prices was even stronger in contrast to the pattern seen through most of the past year. Although supply constraints are most obvious in the Dublin market, our sense is that Central Bank measures should act to constrain the pace of price increases in the capital. The diagram below hints that the out-sized monthly gain in Dublin prices in August may owe something to specific seasonal influences or statistical issues that almost inevitably follow because of the difficulty in making like for like comparisons in relation to property sale prices.

A further complication is the not-unusual divergence between today's CSO data sales prices and the softer tone evident in asking prices in today's report. The easing in asking price inflation may reflect some scaling back of expectations among sellers. These considerations also suggest that a more subdued trend in monthly changes in sales prices could become established towards end year.

This non-exhaustive information is based on short-term forecasts for expected developments in the economy and financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalised investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a judgment as of the date of the report and are subject to change without notice.