Irish property prices rose in every region of the country in September, climbing an average 7.3 percent from the same month a year before, and analysts said lack of supply would continue to drive the market higher. September's annual rise was the biggest in any month since mid-2015.
While Ireland was left with a surplus of houses after the spectacular bursting of a property bubble in 2007 that cut values in half, the country's accelerating economic recovery has seen supply fall far short of demand. In Dublin, where the recovery began three years ago, prices were 5.4 percent higher year-on-year, although they remain a third below their pre-crash peak. The rest of the country was up 11 percent, the Central Statistics Office (CSO) said on Thursday.
"Irish house price inflation is accelerating as the market grinds tighter. This reinforces our decision to revise up our forecast for house price inflation to 7 percent in 2017," said Conall Mac Coille, chief economist at Davy Stockbrokers. Prices had begun to stabilise at an annual growth rate of around 4 to 5 percent a year ago following the introduction of strict new central bank deposit rules on mortgage lending, but have started picking up again over the past three months.
As its construction industry struggles to recover from the crash, Ireland has failed in each of the last six years to build even half the 25,000 homes analysts say are needed nation-wide each year to meet demand.
While data from Ireland's housing ministry suggests 10,500 houses were completed in the first nine months of the year as measured by new electricity connections, the CSO figures showed less than 2,000 new homes have been sold so far in 2016. The chronic shortage of housing has pushed residential rents above peak levels, adding further pressure to house prices as more investors return to the market, John McCartney, director of research at estate agent Savills, said.
"What we are now seeing is a resumption of price growth as investors are being attracted into the market by ever higher rents. Intensified competition between investors will drive further price growth," McCartney said. The Irish government's decision last month to offer a tax break to first-time buyers of new homes in a measure designed to stimulate house building will also eventually contribute to further house price increases, McCartney added.