Lending limits blamed as property prices fall again

It follows a drop in prices in January for houses and apartments.

Prices fell by 0.4pc in February, after falling by 1.4pc in January, new figures from the Central Statistics Office show.

The falls are set to come as a blow to more than 200,000 homeowners whose properties are still worth less now than they were seven years ago.

But those hoping to buy their first home will be encouraged that rampant price rises appear to be tailing off.

Experts said the biggest issue with the market was still a shortage of supply of new properties for sale. The Economic and Social Research Institute (ESRI) said this week that the Central Bank lending rules would mean fewer houses would be built.

The new lending restrictions imposed by the Central Bank were also singled out as one of the main reasons for the prices decreasing for two months in succession.

The new rules came into force on February 9.

Nationally, prices are still up 14.9pc on an annual basis, the CSO figures show.

In Dublin, residential property prices fell by 0.7pc in February.

However, Dublin residential property prices were 21.4pc higher than February last year.

Nationally, residential property prices are 39pc lower than the peak of the market in 2007. In Dublin, prices are 39pc lower than they were at the top of the market.

Outside Dublin, prices are 42pc lower than the level they reached seven years ago.

Calculations based on the figures show that nationally, including Dublin, the average property price was €204,000, up €26,500 from a year ago.

The calculations by Goodbody Stockbrokers also show the average property price in Dublin was €274,200, up by €48,000 in a year.

Outside Dublin, prices are up €12,600 in a year, to €165,000.

The CSO calculates its price data from mortgage drawdowns, which are based on property price sales agreed around three months ago.

The Central Bank announced its plans to restrict mortgage lending on October 7 last year, an announcement that is likely to have caused sellers to lower their prices.

Goodbody Stockbrokers economist Dermot O'Leary said: "The slowdown over recent months may be a reflection of the initial uncertainty around the announcement of the new Central Bank mortgage rules in October."

Economist with Merrion Stockbrokers Alan McQuaid said a lack of supply of houses had been pushing up prices, particularly in Dublin.

"However, the most recent planning permissions data showed a sharp rise in the third quarter of 2014, indicating that things may be starting to improve on this front, which should help to reduce the increase in house prices over time.

And he warned that the new lending restrictions imposed by the Central Bank are also likely to weigh negatively on buyers and help to push down house price growth in 2015. "Still, the generally improving economic backdrop should sustain the house price recovery."

Lending limits may have also led to a front-loading of purchases in the last two months of last year, Philip O'Sullivan of Investec Bank said.