With property prices near their Celtic Tiger peak, are we heading for a new crash?

Overall, the CSO property price index for the State is just 5.1pc lower than its highest level in 2007.

Dublin prices are 12pc lower than their February 2007 peak.

Prices are rising at a rate we have not seen for more than half a decade.

So, will it be different this time, or is history due to repeat itself with a property price collapse?

First, the good news. Supply is being ramped up at a considerable rate.

The Department of Housing says commencement notices for 30,724 residential units were received last year, a 42pc increase on 2020.

The 2021 total is almost the same as the combined totals for 2016 and 2017.

Commencement notices data indicates the number of houses and apartments on which construction commenced in any given month.

The bad news is that this is probably still not enough.

A chronic shortage of both new and second-hand homes to buy means property price inflation is now in double-digit territory in every region of Ireland.

Davy Stockbrokers economist Conall Mac Coille attributes this to the fact that employment in higher-paid segments of the labour market has been exceptionally buoyant during the pandemic.

A build-up of pandemic savings is also paying its part.

On current trends, Irish property prices are likely to exceed their 2007 peak in the early months of 2022, experts reckon.

Economist with KBC Bank Austin Hughes says prices will rise for a few months, but some slowdown in housing inflation may emerge as this year progresses, due to a surge in new home building.

He said that, unlike the Celtic Tiger period, this time there are limits on borrowing to stop homebuyers and banks over-extending themselves, which should avert a new crash.

During the last boom, people were able to borrow using 100pc mortgages and were taking out loans that represented 10 times their incomes.

Now Central Bank lending rules limit mortgage borrowing to three-and-a-half times income, with first-time borrowers needing at least a 10pc deposit, with 20pc required by movers.

“There also needs to be clear and present evidence of earning capacity before credit will be extended,” Mr Hughes said.

Irresponsible lending during the Celtic Tiger boom meant people could falsely claim they were due an inheritance soon or were due a big bonus, and over-borrow on that basis.

“Another important factor is that borrowing costs are much lower now, and even if rates rise, they are unlikely to go very high,” Mr Hughes said.

We also have more borrowers on fixed rates now than when the crash happened, plus more people at work.

However, he cautioned that a new crash cannot be ruled out.

This is especially the case if there is a black swan event – something not anticipated like Covid-19.

The problem with capping mortgage borrowing is that it has put additional pressure on the rental market.

Private rents rose by 8.4pc in the last year, and now 5pc above pre-pandemic levels.

We may not expect a new property price crash, but we are set to see property prices rise further, added to the current rental crisis situation.