Residential property prices rise 8.1% y/y in February

The latest Residential Property Price Index (RPPI) release from the CSO shows that Irish residential property prices rose 8.1% y/y in February, the fastest pace of appreciation in prices since June 2007.

It should be noted that the base effect is putting a shine on this headline rate of change, as February 2013 was the second-lowest reading in the history of the RPPI (which goes back to the start of 2005).

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Investec’s Philip O’Sullivan says that ‘it expects to see a similar impact in next month’s release given that March 2013 was the trough in Irish residential prices, as per the RPPI’.

Prices rose 0.1% m/m in February, following the 0.7% m/m drop seen in the previous month. We attribute the m/m drop seen in January (the first in 10 months) to a temporary bout of indigestion in the market after buyers front-loaded demand into Q4 2013 to avail of the three year local property tax exemption for properties purchased before the end of last year. An analysis of transactions on the website shows that 4,722 sales were concluded in December 2013 and 1,859 in January 2014 (-61% m/m).

In terms of the regional performances, Dublin leads the way once again, with prices in the capital rising 13.3% y/y (houses +13.6% y/y, apartments +10.5% y/y). This is the seventh successive month in which double-digit growth in prices in the capital was recorded on a y/y basis, although it should be borne in mind that Dublin prices are still 50% below peak levels even after this improvement.

In the previous RPPI release we noted that January 2014 had seen prices outside of Dublin turn positive on a y/y basis for the first time in six years (+1.2% y/y). Today’s release shows that the national excluding Dublin index rose 4.2% y/y in February – the highestannual pace of growth since late 2007 but as with the national index we caution that this growth rate is flattered by base effects.

All in all, the continued strength in Dublin prices is in line with our expectations given the very tight supply of units in the capital and its superior economic fundamentals. We are similarly unsurprised to see another positive print in prices outside of Dublin – indeed, in our “Irish Housing: From Stabilisation to Recovery” report, released on February 27th, we said that “the turnaround in the Irish residential market will spread beyond the Greater Dublin Area, with rising prices set to be a feature of many urban areas, in 2014” says, Philip O’Sullivan, Investec.