Influx of workers gives big boost to property
Bill Tyson Personal Finance Editor A NEW wave of immigration will help drive property price growth of 8pc this year, IIB Bank predicted yesterday.
The number of migrant workers here already 'dwarfs' UK levels, said IIB economist Austin Hughes.
Yet this "extraordinary number may well be just the first wave", he said, announcing his 2006 forecast for the property market.
Around 137,000 Poles came here last year, using airline seat capacity of 1,500 per week. In 2006, that capacity will increase over 500pc to 8,000 seats per week, stimulating an even greater influx of immigrants, Mr Hughes noted.
This will create demand for rental properties as well as new homes.
The phenomenon is similar to a "Ryanair effect on property prices noted in certain parts of France and Italy following the introduction of low-cost flights".
Mr Hughes, who has been one of the more conservative economic forecasters, was very bullish about prospects for property.
He signalled that chances of the "bubble bursting" were remote - even with interest rates on the rise.
Mr Hughes predicted a 0.75pc increase in rates this year, which is slightly more than expected.
However, "any adverse impact (on property prices) from higher interest rates will be more than offset by the persistence of very strong demand," he said.
Fast-rising private sector debt levels of ?260bn have raised fears that debt is spiralling out of control.
Yet Mr Hughes played down these fears, insisting that Irish consumers are in fact "underborrowed".
Money on deposit totals ?60bn and householders have ?545bn worth of positive "equity" in their homes.
"Looking only on one side of the balance sheet ignores the fact that Irish property wealth has soared in the past decade," Mr Hughes said.
"The net worth of Irish householders (market value of house less property debt) has risen from 2.3 times after tax incomes in 1996 to 4.3 times in 2005."
This is three-and-a-half times greater than the equivalent level in the US, where householders use their property almost as an ATM outlet, dipping into their equity over and over again by borrowing, Mr Hughes observed.
"This comparison underscores the the exceptional level of Irish property-related wealth and its extraordinary growth in recent years."
He estimates that the average Irish household will hold some ?270,000 in net property wealth in 2006.
"Moreover, someone purchasing an average priced Irish house in 2001 will have seen the value of their property rise by some ?110k by the time the first SSIAs mature," he added.