PRICES IN IRELAND’S stretched housing market will continue to rise until supply increases, creating an environment that resembles the disastrous Celtic Tiger property bubble.
The latest CSO residential property price index showed housing costs were rising at a still-accelerating rate at the start of the year.
In the year to February, prices nationwide were up 13% – the highest rate of inflation since mid-2015. That followed a 1.1% jump in prices compared to the previous month.
Price increases in Dublin were slightly lower that elsewhere in Ireland, however the figure for the capital was pulled up by a 14.5% increase in the price of apartments.
Commenting on the figures, Merrion economist Alan McQuaid said: “Prices are only going one way in the short-term until the supply issue is resolved.
“There are shades of the Celtic Tiger era regarding the property market at the moment, and we all know how that ended.”
Across Ireland, house prices are 21.8% lower than their 2007 peak, however several groups have warned that the pent-up demand for property risks overheating the economy again.
Separate figures, released by Eurostat yesterday, showed that Ireland had the fastest rising house prices in the EU late last year.
A hot potato
McQuaid noted that housing had overtaken health as the government’s chief political “hot potato” and it had introduced several measures to help alleviate the problem.
“However, as we wait for the measures to come through, prices will continue to rise.
“We see house price growth staying in positive territory on a year-on-year basis for the foreseeable future, with the annual rate of increase now looking like it’s set to remain in double-digits for well into 2018 at least.”
A government report, released this morning, identified that more, affordable apartments needed to be constructed in order to address the housing crisis, however it remained more financial attractive for developers to build hotels and student housing.
Only around one-quarter of the approximately 20,000 new dwellings approved in Ireland last year were apartments. It is thought that up to 50,000 new homes are needed annually to keep pace with demand.
Apartment building standards have been relaxed in an effort to cut the cost of building new complexes, while the government has increased levies on vacant sites in a bid to deter landowners from sitting on prime development property and introduced fast-track approvals for large-scale projects.