Comment: Honohan to put brakes on house market
Published 01/05/2014 | 02:30
WE want the property market to recover from one of the worst crashes in the world, but galloping house prices are the last thing we need.
Prices have already jumped by 14pc in Dublin in the last year, despite falling back in February and again in March.
The year-on-year rise in Dublin prices was the 15th consecutive monthly rise.
For the country as a whole, prices fell in March, but rose in the year by close to 8pc.
Now Central Bank Governor Patrick Honohan says he will burst any bubble in Dublin using regulatory powers to stop mortgage lending getting out of control.
This should ensure a more even recovery in prices across the country.
The governor is threatening to do precisely what did not happen between 2004 and 2008, when the property market got out of control.
Dr Honohan's intervention came as ratings agency Standard & Poor's predicted prices will keep rising by around 3.5pc nationwide this year, and by 2pc next year.
They are the sort of rises that are sensible, and in line with a battered property market and economy emerging from an almighty crash.
Rising employment and pent-up demand from younger people are helping to generate housing demand.
But there are still huge problems. A chronic shortage of family homes is prompting queues on Saturday mornings where there are viewings.
Recently estate agency Douglas Newman Good said prices were rising by €5,000 a month in Dublin as it struggles with a chronic shortage of supply.
Bank mortgage lending is still anaemic, and needs to pick up hugely.
And the recovery in the housing market outside the capital remains erratic.
If Dr Honohan holds to his promise to keep the market in check and Standard & Poor's predictions are right, then the average property price nationwide should rise by around €10,000 over the next two years.
That is the sort of rise that is sustainable and would be welcomed by existing homeowners and new buyers instead of 'bubbling' price surges.