New figures show property prices rose by 6.5pc in the year to March, but the rate of increase was the slowest for two years. Brokers Ireland said a squeeze on mortgage lending was likely to make it more difficult for first-time buyers to get on the housing ladder.
The AIB Purchasing Managers’ Index out this week shows a slowdown in house-building due to uncertainties caused by the conflict in the Middle East and the knock-on effect this is having on the cost of building materials.
Rachel McGovern, deputy chief executive at Brokers Ireland, which represents mortgage, insurance and financial brokers, said demand for housing was still strong, but higher inflation was likely to hamper supply.
The Central Statistics Office (CSO) said the annual increase in residential property prices nationally of 6.5pc for March represented the lowest annual increase since the 6.2pc recorded in February, 2024.
Ms McGovern said respite from high property prices appeared to be in sight.
Rachel McGovern of Brokers Ireland. Photo: Stephen Wall Morris
But she added that “demand is still way out of sync with supply and the risk of rising inflation is further hampering supply”.
Ms McGovern said rising inflation was likely to make lenders more cautious with stress-testing borrowers.
“Caution on this side of the equation is no bad thing, but it leaves aspiring buyers in a catch-22 situation, struggling to get on the property ladder at a time when rental costs are very high – well in excess of mortgage repayments in many instances,” she said.
Many who had bought could not have achieved it without either family support or state schemes such as Help-to-Buy and First Home or a combination of all three, Ms McGovern said.
Independent economist Austin Hughes said the slowdown in the rate of property-price inflation was due to an increased supply of homes to buy.
New home sales are up almost 25pc because of stronger home-building, he said.
But he added that affordability strains and uncertainty were now a major feature of the property market.
“The 6.5pc rise in home prices in March is still rising more than twice as fast as the 3.1pc increase in average earnings in the final quarter of 2025. In addition, concerns around tech sector jobs would have dampened demand,” he said.
Mr Hughes said it was likely that house-price inflation would continue to moderate as supply continued to improve.
Economist Austin Hughes said ECB interest rate increases would also affect affordability
But buyer caution is also likely to become a factor due to the war in the Middle East and because employment growth is slowing.
Mr Hughes said affordability would be further hit by looming European Central Bank (ECB) interest rate increases.
“However, construction costs will be under upward pressure because of the war in Iran,” he said.
Mortgage rates in Ireland have ticked up for a second month in a row. The ECB is expected to hike its lending rates by 0.25 of a percentage point next month.
The average rate was 3.52pc for a new mortgage in Ireland in March, up from 3.51pc the previous month and from 3.50pc in January, the Central Bank said.