PROPERTY prices are set to keep rising in the greater Dublin area over the next two years, but could fall in the rest of the country.
This two-tier market is now firmly embedded, housing expert and Trinity College Dublin (TCD) lecturer Ronan Lyons has said.
The rise in house prices in Dublin is largely due to a growing shortage of properties for sale, while there is oversupply in the rest of the country.
Dr Lyons said this was likely to lead to a rise of up to 10pc in prices in the capital over the next two years, with prices likely to rise only slightly or even fall in other parts of the country.
"It's difficult to see how they could increase by more than that," he said, adding that prices outside of the capital might fall or rise by about 5pc.
House construction needs to double on the east coast, Dr Lyons said in a report on the housing market prepared for the Irish Banking Federation.
There is a need to be building three times the number of new homes in Dublin currently being built, he said.
The housing expert, who is assistant professor of economics at TCD, said: "Perhaps the most startling thing to emerge from the report is just how few new homes are being built."
Fewer than 1,400 homes were completed in Dublin during 2013, when prices rose at double-digit rates.
This is compared with more than 2,200 during 2010, when prices were falling at double-digit rates.
"While this marks a small increase on the figure for 2012, it is surely of huge concern to policymakers, as is the lack of commencements of new homes," Dr Lyons, who is also an economist with property website Daft.ie, said.
About 10,000 new households were being formed a year in the capital every year.
"Taking into account up to 5,000 family homes that come on the market each year due to down-trading and executor sales, it still leaves a significant shortage of accommodation in Dublin that is growing year on year," he said.
A huge shortage of homes for sale has prompted the Government to prepare a raft of measures aimed at increasing the supply of housing and creating 60,000 jobs in the construction sector.
Figures out earlier this week show that a mere 15,000 mortgages were issued last year, down 900 from the previous year. Dr Lyons said it was important that the banks were prudent when giving out mortgages to avoid a housing bubble, which occurs when credit is too readily available.
He said new buyers could get a mortgage at a rate of 3.5pc at the moment, but interest rates could rise to between 4.5pc and 5.5pc over the life of a mortgage taken out now.
Meanwhile, the construction sector is set for a return to steady growth, with output expanding by 30pc by 2018, according to a report.
The expansion will lead to the creation of a little more than 30,000 construction jobs, which will bring total employment in the sector to 178,000, if barriers to development can be overcome. According to the report, written by Amarach Research on behalf of the Society of Chartered Surveyors Ireland, the return to growth will be driven by the private commercial and residential sectors.