Capital needs '5,000 new houses a year' to meet family demands
UP to 5,000 houses a year need to be built in Dublin to satisfy demand for family-type homes, a leading economist has estimated.
Dermot O'Leary of Goodbody Stockbrokers said a chronic shortage of homes in the capital is causing a surge in prices.
This is the "wrong reason" for prices to rise, he said, as he launched a report for the Irish Banking Federation on the housing market.
However, property prices are falling in the rest of the country because of oversupply.
This year will see another record low for the number of houses and apartments completed. But despite this the housing market is recovering, Mr O'Leary said.
"The market is still a good distance from normal, but it is at the start of the up-cycle," he said.
However, he stressed that the property market is still at the bottom of one of the worst property busts in history.
"Ireland does have an oversupply of housing units nationally, but it is becoming increasingly clear that there is a shortage of appropriate family homes in the capital."
Not enough homes are being built in Dublin because so many developers have gone bust, banks are not funding construction and because of planning restrictions, he said.
The Irish Banking Federation housing monitor, compiled by Mr O'Leary, found that property sales rose by 14pc to 4,451 in the first three months of the year.
It was the sixth consecutive quarter of growth in the volume of house and apartment sales. The banking federation said the report points to a continued stabilisation in prices.
And the higher number of transactions was despite fewer mortgages being given out. Mr O'Leary estimates that up to six out of 10 property purchases are now for cash.
"While one interpretation of this may be that credit is not available in the banking system, another is that buyers are using cash to invest in the Irish property market given the superior returns relative to ever-shrinking deposit rates in the Irish banks.
"Either way, it is a vote of confidence that buyers are willing to dip their toes into the Irish housing market at current valuations."
Moves by banks to repossess properties of buy-to-let investors who are in default are unlikely to result in a significant increase in housing supply, Mr O'Leary said.
Any properties that are repossessed are likely to be apartments and only in small numbers.