Property price increase is a two tier system

The CSO’s property price index this morning belies a two-tier recover in home prices with Dublin surging ahead and with the rest of the country still largely in the Doldrums, analysts say.

The CSO released the latest Residential Property Price Index, covering the month of September, this morning.

At a headline level, residential prices rose 3.6pc y/y, extending the current sequence of annual gains to four months. However, as we have previously noted, this headline performance masks a two-tier performance, with Dublin prices outpacing the rest of the country. In the capital, prices jumped 3.9pc m/m during September, while on a y/y basis they are +12.3pc, a second successive month of double digit gains. This reflects both tight supply and superior economic fundamentals in the city.

In the rest of the country, prices declined by just 0.1pc m/m, with the y/y rate of change at -2.6pc continuing an unbroken sequence of annual falls stretching back to February 2008. However, the index outside of Dublin has been in a narrow range of 67.4-67.5 over the past four months, and it is 2.0pc above the lowest ever reading of 66.1 booked in March, so perhaps we are not far from seeing prices in Dublin and ‘the rest of Ireland’, as measured by the RPPI, simultaneously in positive territory – although it should be noted that the outlook for prices is far from uniform, with excess supply likely to serve as a dampener on prices in many regional markets for years to come.

“In saying all of that, as the Irish banks gear up for another round of stress tests over the coming months, they will doubtless welcome the improving overall trend in property prices, which has important consequences for provisioning levels,” said Investec Ireland economist, Philip O’Sullivan. Source: Business World