Research report issues warning over another boom in Irish property prices
Property prices in Ireland, which are already soaring, could rise by 20% in the next two years, mostly due to a lack of homes for sale but also due to mortgages being easier to obtain.
A new report from the Economic and Social Research Institute (ESRI) says that property prices could see an even bigger surge, similar to the boom that was seen before the economic downturn of 2007.
Official data from the Central Statistical Office shows that prices have reached a two year high, up 12.8% in the 12 months to September 2017. Since a low in early 2013 prices across Ireland have risen by 70.2% while in Dublin prices have soared by 87% in the last four years alone.
The ESRI report suggest that increased lending will also fuel the growth between now and 2020. ‘While a normal, functioning credit market is essential for an economy generally, it does raise the possibility that credit growth in itself could start to become an engine for house price increases as it did in the Irish market post-2002,’ said Kieran McQuinn, research professor at the ESRI and author of the report.
‘This would result in prices growing at a greater pace than the underlying fundamental factors in the economy would suggest, inevitably resulting in overheating,’ he explained, adding that the present Central Bank lending rules were the most efficient method of avoiding such a scenario.
The ESRI said that about 18,500 new homes would be completed this year, 23,400 next year, 29,700 in 2019 and 36,700 in 2020 and McQuinn said any policy being considered by the Government should focus on increasing the housing supply.
Macroprudential policies should also not serve to increase housing demand, for example, by easing loan to value or loan to income restrictions, the report also explained.
‘As economic growth continues and the banking sector recovers, it will be critical to monitor credit provision to avoid fuelling house price inflation,’ McQuinn adde