By Kevin O'Neill
Less than one-fifth of all homes bought this year have been new builds.
New data released by the CSO illustrates the reliance on existing builds in the property market. It also shows price inflation at its lowest point since December 2007.
It comes just days after the Central Bank warned that 34,000 new homes are needed each year for the next decade to meet demand, and after the ESRI said "prices are as high as they can possibly go given affordability in the domestic economy."
The CSO's Property Price Index shows an annual price increase of 0.9% in the year ending October 2019. This compares to an increase of 8.3% in the 12 months ending October 2018.
The Dublin market is driving the slow-down. Prices in Dublin are down 1.5% in the year to October, with prices in Dun Laoghaire-Rathdown dropping by 7.1% in that period.
Excluding Dublin, prices have increased by 3.3%.
Overall, the national index is now 16.9% lower than its highest level in 2007. Dublin residential property prices are 21.3% lower than their February 2007 peak, while residential property prices in the Rest of Ireland are 20.1% lower than their May 2007 peak.
Property prices nationally have increased by 85.3% from their trough in early 2013. Dublin residential property prices have risen 94.9% from their February 2012 low, whilst residential property prices in the Rest of Ireland are 83.8% higher than at the trough.
From January to the end of October, a total of 36,894 dwelling purchase orders were filed with revenue. Of these, just 6,666 (18%) were for new dwellings.
In the 12 months ending October, first-time buyers accounted for 31.5% of purchases, with non-occupiers, such as investors, now accounting for 15.7% of sales.
Austin Hughes, chief economist with KBC Bank Ireland, said new supply is playing a role in the slowdown in prices. However, he added, there are other factors.
On balance, it seems unlikely that improving supply can adequately explain the trend slowdown in house price inflation, particularly as recent Central Bank research confirms various other estimates that suggest new housing completions are still at levels substantially lower than those required to match ‘natural’ demand for housing
- he said.
Affordability constraints are "biting hard" on inflation, too, Mr Hughes said.
"The average increase in house prices through the past five years has been 10%, about five times the rise in average earnings over the same period. This divergence has progressively reduced the number of people with the wherewithal to finance a home purchase at present," Mr Hughes said.
Rachel McGovern, director of financial services with Brokers Ireland, said the market will be dysfunctional for the "foreseeable future" due to the reliance on existing dwellings and the continued difficulties for first-time buyers in accessing the market.
