House price growth of 8.5pc set to outstrip rest of Europe
House price growth in Ireland is set to outstrip the rest of Europe this year.
Price rises will be driven by ongoing supply shortages and Brexit-related demand, according to international ratings agency S&P.
“We expect Ireland’s housing market to experience the strongest year-on-year nominal house prices rises of 8.5pc this year and 7pc in 2018, underpinned by supply shortages and continuing economic recovery,” Standards & Poor’s said.
The Brexit-related relocation to Ireland of some of London’s financial sector workers should also support the market.
Supply shortages in key areas, such as Dublin, along with a now broad-based and jobs-rich recovery should underpin house-price growth up to 2018.
The latest figures from the Central Statistics Office show property prices rising by 12pc on an annual basis.
S&P said the relocation to this country of some of London’s financial workers as well as financial institutions’ decision to expand EU operations in Dublin, rather than London, should also support house prices.
The ratings agency said the economy continues its path of a broad-based and jobs-rich recovery.
Wage growth has yet to pick up more strongly, but households currently benefit from low inflation, owing to a weaker UK currency, S&P said.
Property shortages are playing a key role in the surge in house prices.
Demand is estimated to grow by 25,000 to 40,000 units a year. This contrasts with only 15,000 units completed in 2016, adding to the existing backlog, S&P said.
Some economists blame the easing of Central Bank lending rules for first-time buyers at the start of this year, and Government’s help-to-buy scheme for first time buyers of new homes, introduced at the same time, for the strong demand for homes.
Housing Minister Eoghan Murphy has committed to a review of the help-to-buy scheme over fears it could be fuelling house-price inflation.
Mortgage lending is expected to hit €7.5bn this year, up from an estimated €6bn last year.