Looser mortgage lending rules linked to Irish house price surge, says MyHome

Looser mortgage lending rules have been cited as one of the factors driving the latest surge in house prices.

According to property website MyHome.ie, house asking prices rose by 7.3 per cent year on year in the second quarter, the fastest pace of growth recorded in two years. Asking prices rose by 5.1 per cent quarter on quarter, it said.

While the website, which is owned by The Irish Times, linked the increase to the strength of the Irish labour market and “the continual poor supply of properties”, it also pinpointed the looser credit conditions as a key driver.

“The clear message from the Q2 2024 MyHome.ie property price report is that house prices have gained further momentum,” the report’s author and Bank of Ireland’s chief economist Conall MacCoille said. “Furthermore, the pickup in the pace of asking price inflation has been broad-based across Dublin and the rest of Ireland.”

It noted that the Central Bank of Ireland’s decision to relax its previously tight mortgage lending restrictions had meant the share of first-time buyers with higher loan-to-income ratios jumped from 6 per cent to 36 per cent in the space of one year. In 2022 the central bank lifted the upper limit on the loan-to-income ratio requirement for first-time buyers from 3½ times their income to four times.

The Economic and Social Research Institute last month criticised the regulator’s move, saying it had placed upward pressure on house prices. The think tank also noted that average loan-to-income ratios were now back to levels not seen since the peak of the Celtic Tiger era.

MyHome.ie’s latest quarterly assessment of the Irish property market, compiled in conjunction with Bank of Ireland, found that annual asking price inflation in Dublin rose to 7.2 per cent in the second quarter (fractionally below the national rate) while asking price inflation outside the capital was put at 7.6 per cent.

The median or middle value asking price nationally, based on MyHome data, was €365,000. In Dublin, it was €465,000 and elsewhere around the country, it was €310,000.

MyHome said that in May, houses were being sold for 6 per cent over the original asking price at the median. The premium above asking prices reflects stronger demand. “This is a stark change to 2023 when the median premium was just 1 per cent,” it said.

The number of properties listed for sale on its website was just 12,500 at the end of June, which MyHome said was still close to a historic low and down 11 per cent on the 2023 level.

Mr MacCoille asserted the sustained strength of the Irish labour market was having a significant effect. “The 4.7 per cent rise in average earnings to €50,300 in the year to Q1 2024 was always likely to push up house prices,” he said, noting the average mortgage approval in April was €313,000, up 4.6 per cent on the year.

Joanne Geary, managing director of MyHome.ie, said: “The strength of our labour market is, of course, a positive thing but without an adequate supply of properties to meet the demand generated by rising incomes, it is inevitable that competition will remain intense.

“It will take time for the growing rate of housing starts to have a real impact, but it is promising to see this figure move in the right direction.”