DUBLIN'S housing market is in the process of going from lukewarm to scalding hot, according to a leading economist.
The warning from Conall Mac Coille, chief economist at Davy comes as new figures from the Central Statistic Office (CSO) revealed that residential property prices grew by around three per cent in Dublin in April, and were nearly 18pc higher than a year ago.
Apartment prices in the city were 17.5pc higher, when compared with the same month last year.
However, the CSO cautioned that the data for apartments was based on low volumes of transactions.
The same marked increase was not seen outside the capital, where the price of residential properties fell slightly by 0.3pc in April. They were just 1.3pc higher than the same month last year.
The CSO figures showed however that residential property prices in Dublin are still nearly 50pc lower than their highest level in 2007.
The Construction Industry Federation (CIF) has warned that the housing market in Dublin with be susceptible to large house price jumps until the supply issue is resolved.
Director General Tom Parlon said: A shortage of supply means the level of demand is not being catered for, and this is leading to an increase in prices in Dublin and certain other urban areas.
“Last year only 8,301 units were completed throughout the country, including just 1,360 units in Dublin.
“This year the market is likely to have a maximum of 10,000 units built nationally and less than 2,000 in Dublin. That simply isn’t enough.
“You can’t just flip a switch and have more housing. It takes 18 months to two years for large housing developments to be brought to market. Given the time frames involved, we can’t afford to delay, we need to take action soon,” he added.
“The longer it takes to fix the problems, the greater the impact it will have on house prices,” said Mr Parlon.
Meanwhile, the Irish Banking Federation’s (IBF) housing market monitor for the first quarter of 2014, which was published yesterday, showed a number of recovery trends in the housing market, including strong growth from “a low base” in both the level of mortgage approvals and draw-downs.
Speaking about the figures, economist Conal Mac Coille, said that prices are only going one direction.
“Daft’s latest survey shows house prices expected to rise by 20pc over the next five years in the capital,” he said. “With buyers increasingly frustrated by the lack of available properties, expectations for even stronger price inflation, well beyond 20pc will surely grow.
“This poses the danger that first-time buyers will desperately stretch their finances unsustainably.”