herald

Monday 18 December 2017

Home prices to rise quickly - claim

HOUSE prices in Dublin are ready to rebound quickly once the economy recovers, a new report has found.

A supply shortage -- and strong demand among the under-35s -- is likely to lead to quick price hikes, it states.

Despite perceptions, there are now a "limited number of vacant dwellings" available for sale in Dublin, Cork and Galway, the document from the Economic and Social Research Institute (ESRI) argues.

The think tank also points to recent studies showing current price levels are "below their long-run equilibrium".

But it comes only days after ratings agency Moody's warned that Irish house prices were likely to fall by another 20pc.

The ESRI highlights data suggesting the majority of renters are aged under 35 and, "once the economy recovers and expectations about house prices change, it would be anticipated that a proportion of those renting would seek to buy a dwelling".

Compiled by David Duffy and John FitzGerald, the article notes the decision to buy will be influenced by factors like the availability of mortgages.

The authors also hint at the possibility of a cultural shift caused by the housing crisis.

Traditionally, the rate of home ownership in Ireland has been very high but the property collapse could see a long-term increase in the number of families willing to rent, they state.



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The report found that four in 10 renters could afford a mortgage. As they marry and start families, they will look to buy a home.

The paper states: "Decisions by households on whether or not to buy a dwelling depend, to a significant extent, on whether purchase is likely to be better value than renting in the immediate future.

"(There) is a large stock of people who are renting who are facing this choice today.

"Central to the decision whether to buy or to continue to rent will be expectations of future price changes as these determine whether the potential buyer considers themselves to be facing a capital gain or capital loss.

"Even if households believe that, in the long run, prices will be stable in real terms, if they believe that prices will fall in the coming year then there is a benefit to the household from waiting by avoiding any expected capital loss."

comurphy@herald.ie

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