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Central Bank lending rules helping to slow rate of house price inflation

The Central Bank's lending limits are helping to slow down the rate of house price inflation, according to two key reports on the Irish property market.

House prices are still on the rise, but the rate of inflation is slowing, mainly thanks to tighter bank lending, according to the latest house price report from property website says asking prices rose 7.2pc in the year to the second quarter of 2018 - the slowest pace of inflation in two years - and down from 9.5pc in the first three months of the year. In Dublin, asking price inflation has slowed to 6.8pc, down from 11pc at the turn of the year.

The report, published in association with Davy, found that the prices of newly listed properties nationally rose by 3pc in the second quarter while prices in Dublin rose by 2.2pc. Newly listed properties are seen as the most reliable indicator of future price movements.

The median asking price for new sales nationally is €270,000 while in Dublin it's €384,000.

Conall Mac Coille, chief economist at Davy, said the slowdown in house price inflation should be welcomed as double-digit price growth could not be sustained over the long term.

"The Celtic Tiger years demonstrated the folly of allowing rising leverage in the market to drive double-digit house price inflation indefinitely," he said.

"This time round, the Central Bank's 3.5 x loan-to-income (LTI) threshold is preventing households from chasing prices higher by taking on excessive mortgage debts."

Mr Mac Coille said the slowdown in asking prices would have been expected to come in the next three to six months. He added: "For now, we are seeing stronger price gains in less expensive areas of Dublin and among the less expensive property types".

The report found one-bedroom apartments in Dublin are up 11.4pc on the year but four- bedroom detached houses are only up 2.3pc.

The report echoes findings released by, Ireland's largest property website, which also found that the rate at which house prices are increasing across the country is finally showing signs of easing.

According to the latest 'House Price Report' from, house prices rose nationally by 2.7pc during the second quarter of 2018, while the average price nationwide during the second quarter was €254,000, 5.6pc higher than a year ago.

This shows the annual rate of increase in list prices during the second quarter of this year is now at its lowest level since early 2014.

Economist Ronan Lyons, author of the report - which noted the shortage of available homes is still at crisis level - said Central Bank rules have "dramatically reduced the potential impact of the most volatile parts of the house price equation".

"Of course, Ireland still faces an acute housing shortage but unlike the past there is a more sensible debate on how to solve the problem," said Mr Mac Coille.

"The short-term ineffectual measures from the early 2000s, such as allowing increased leverage on mortgage loans, tax breaks or mortgage interest relief, have been left by the wayside.

"Instead the debate has focused on planning reform, housing density and efficient use of State land and infrastructure funds."

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