Property price growth has slowed to its lowest level in five years, according to a report from Davy and property website myhome.ie, which is owned by The Irish Times.

The study also suggests asking prices in Dublin, the most volatile segment of the market, are now falling for the first time since 2013.

The latest barometer provides further evidence of a major slowdown in the State’s property market linked to the Central Bank’s strict lending rules and a gradual pick-up in supply.

It suggests property prices nationally rose by just 2.4 per cent year on year in the second quarter of 2019 while in Dublin, annual inflation turned negative for the first since 2013 with prices falling by €2,300 year on year.

Despite the downward trend in the annual inflation rate, prices nationally are continuing to rise, albeit at lower rates.

The report found that asking prices for newly listed properties increased by €5,000 in the second quarter, while they rose just €2,000 in Dublin. This was the weakest second-quarter gain in the capital since 2012.

Overall, the median asking price for new sales nationally was €276,000, up €5,000 on the previous quarter, while the median asking price in Dublin was €382,000, an increase of €2,000.

Outside the capital there was stronger growth, with prices increasing by €7,000 on the quarter, and by just over €10,000 year on year. Newly listed properties are seen as the most reliable indicator of future price movements.

Rules tightened

Davy chief economist and the report’s author, Conall MacCoille, blamed the slowdown on increased regulation.

“The current slowdown in price inflation is largely due to the Central Bank’s lending rules and stretched affordability,” he said, noting the Central Bank last year tightened its lending rules.

Previously up to 20 per cent of new mortgage loans for house purchase were allowed to have a loan-to-income ratio exceeding 3½ times income. The new rule reduces this allocation; only 10 per cent of trader uppers will now be allowed a ratio of more than 3½ times.

“These factors are preventing the latent housing demand from translating into rampant house price inflation fuelled by rising leverage on mortgage loans,” Mr MacCoille said.

“Ireland’s economy continues to perform well and the property market will continue to be underpinned by high employment and wage growth,” he said.

“While the economy has been driven by strong foreign direct investment, export growth and a slow rebound among indigenous companies, the recovery in home building is still in its infancy,” he said.

Angela Keegan, managing director of myhome.ie, said the fact that we are seeing more transactions, more properties on the market and more sustainable price increases were all positives for prospective buyers.