The latest edition of Knight Frank’s Global Residential Cities Index, which examines mainstream residential prices on a city rather than on a country basis, has shown that price growth in Dublin’s residential property market weakened in Q2 2016. Prices in Dublin increased by 2.5% in the year to Q2 2016, down from 3.9% in the year to Q1 2016. As a result Dublin’s position in the global rankings has declined from 80th to 95th, however this masks the fact that Dublin outperformed many major global cities such as New York (2.1%) and Singapore (-3.6%). At a European level, Dublin sits in 30th position, ahead of a number of major European cities such as Paris (1.3%), Milan (-0.1%) and Rome (-2.2%).
In total, the Global Residential Cities Index, which is based on official house price data for mainstream residential markets, increased by 5.5% in the year to Q2 2016, the strongest annual growth rate in over two years. According to the index, 114 out of the 150 cities tracked by the index recorded price increases in the year to Q2 2016. The Chinese city of Shenzen was the strongest performing city as prices increased by 47.4%, almost 14 percentage points higher than Shangai, the second highest ranking city, where prices increased by 33.8%. Despite fears earlier in the year regarding a slowdown in the Chinese economy, China’s residential property market has continued to perform strongly, with six Chinese cities (Shenzhen, Shanghai, Nanjing, Beijing, Guangzhou and Hangzhou) all sitting within the top ten rankings for annual price growth. In Europe, Budapest leads the rankings with prices accelerating by 24% on an annual basis. However, cities in the UK, the Netherlands and Scandinavia are also well represented. Four of the continent’s top 10 performing cities are in the UK: Bristol, London Nottingham and Birmingham.
While this edition of the report tracks price growth until the end of June, the next edition of the report will be particularly important as it will gauge the impact of a number of key political and economic events on the global residential property market, in particular the impact of the UK’s decision to leave the European Union. Furthermore a number of municipal governments in China are now introducing a raft of stringent cooling measures at a local level to dampen sales. These measures range from limiting non-locals to single home purchases and tightening rules for local residents in relation to second home purchases. The introduction of these measures are not just confined to Chinese cities, with cities such as Vancouver, where large prices increases have also been observed, are also planning on introducing similar measures. As government’s worldwide move to take the heat out of their property markets, recent developments in Dublin’s residential property market would seem at odds with this trend.
With only a week to go to Budget 2017, the Government is likely to introduce a Help-to-Buy scheme in order to assist First-Time Buyers, who have been stymied by the Central Bank’s mortgage lending rules, with purchasing their first home. A recent report by the Central Bank estimated that it can take up to four years for a couple living in a two bedroom apartment in Dublin to save a deposit for a three bedroom house. The scheme is rumored to consist of an income tax refund ranging from €5,000-€15,000 which will be discharged to help buyers meet the Central Bank requirements in relation to mortgage deposits. There will be an upper limit on the price of a property qualifying for the new scheme, with the cap expected to be in the region of €350,000-€380,000.