Ireland House prices take a dip

Location: Kincora

I like this report, not sure how long it will last.

First dip in house prices as rate hikes hit buyers

� Experts predict more falls� ECB poised for 0.25pc rise

THE price of new houses fell last month in the most dramatic evidence to date that rising interest rates are rapidly cooling the market.

The fall is said to be the first in two years - the last was merely a minor blip and prices surged after that.

This time round, however, there is no such likelihood.

In fact, economists now predict prices could fall further.

They said the five ECB interest rate rises since last December and the possibility of some change in stamp duty rates in the Budget are dragging back the housing market.

The fall in new house prices is also evidence that developers are pegging back price rises to ensure people continue to buy houses and apartments.

Across the housing market as a whole, prices are continuing to rise but the rate of growth slowed for the fifth month in a row in October.

This is the first time in almost two years that the rate of house prices rises has eased off in all sections of the property market.

With another 0.25pc rise in interest rates expected next month, property experts are now predicting that house prices will slow dramatically next year.

So far this year the five rate rises have added �431 a month to the cost of servicing a homeloan on the averagely priced home. If rates rise again next month that would mean it would cost an extra �500 a month to pay a mortgage on a an averagely priced house, compared with this time last year.

Last month overall house prices increased by 0.6pc from the previous month. This compared with a 0.7pc rise in September, according to the Permanent TSB/ESRI monthly house price index.

The annual rate of growth last month was 14.2pc, down from 15pc in September.

But the annual rate of growth slowed in all sectors last month, the first time in almost two years that this has happened.

Permanent TSB's Niall O'Grady said all the indications were that the housing market was set for a soft landing.

"It is clear that we are moving into a new stage in the price cycle. The positive thing is that so far it appears that this new phase will be characterised as a soft rather than a hard landing."

By the end of this year house price rises will be pegged back to between 11pc and 12pc, down from 21pc in May this year.

Mr O'Grady added that he expects the rate of house price rises to slow to 5pc next year.

The average price paid for a house nationally in October of this year was �309,963, more than �32,000 higher than that recorded for December 2005 (�277,852).

House prices in Dublin increased by 0.9pc last month, compared with 1.7pc in September.

Outside Dublin the rise was 0.2pc in October, compared with 0.6pc in September. For first-time buyers, house prices climbed by 0.4pc in the month, and a rise of 13.6pc over the past year. House prices for second-time buyers grew by 0.6pc in the month and 14.4pc in the year.

* Taoiseach Bertie Ahern last night told the Confederation of British Industry (CBI) conference in London: "Interest rates are going to go up a bit, I think that's obvious. We don't want to see that happen too much."

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Ireland House prices take a dip