Editorial: House price reality bites and differs greatly from buyers’ affordability

The latest study on house values shows the asking price for homes has shot up at its fastest rate for almost two years. In yet another throwback to the Celtic Tiger days, there has been a huge jump in the number of first-time buyers maxing out on what they can borrow. This is due to the surge in property values.

God only knows where house prices would be were it not for the Central Bank’s stringent rules on ­borrowing staving off the not-so-glory days of the 100pc mortgage. The borrowing limits are painful but they are there for the protection of homeowners – just ask the generation who entered negative equity, ­mortgage arrears and loss of income, or all three, when the economic crash happened.

National asking prices were up 7.3pc in the three months to May when compared with the same period last year, according to the latest quarterly house price report from MyHome.ie in association with Bank of Ireland. Now property experts are predicting that values will rise by between 5pc and 6pc over the year in full, a situation that will pile more pressure on those trying to buy their first home.

A report at the weekend on Europe-wide house price increases showed the difference between buying and renting. Since the height of the crash in 2010, rents increased at the third highest level in Ireland, at 104pc – behind Estonia on 201pc and Lithuania 174pc. Over that same period, the Eurostat study showed Irish house prices have gone up by 65pc. So it’s clear that as exorbitant as it is to buy a house, renting has become even more costly. Given the vagaries of the rental market, it’s no wonder so many people are desperate to get on the property ladder.

Housing remains the number one issue for voters, according to yesterday’s Ireland Thinks opinion poll in the Sunday Independent. Despite the rise in support for the two main coalition parties, the poll also shows the level of dissatisfaction with housing policy.

The public disagrees strongly with the ­academic view that there is a danger of oversupply of new housing should the Government fulfil its promise to build an average of 50,000 homes per year. And there is a clear view too that not enough houses are being built at the moment, regardless of the Government’s self-congratulation over a rise in house starts.

The public believes that house prices are ­overvalued. And disagree with the notion that a three-bedroom home in a new affordable housing scheme in Coolock, Dublin, is worth €475,000. Depending on where you live, an affordable home is largely viewed as being in the €200,000 to €350,000 range. Try getting a house for that price in Dublin though. The Government rightly remains under pressure to increase the supply of housing, and accordingly, reduce house prices.