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Sunday 18 November 2018

Property prices in Ireland rising at fourth fastest rate in the world

'Prices here were up 12.7pc in the first three months of the year.' (file photo)
'Prices here were up 12.7pc in the first three months of the year.' (file photo)

Property prices in Ireland are now rising at the fourth fastest rate in the world.

The new data comes as employers' body Ibec said the housing market is now dysfunctional and it is damaging the country's economic prospects.

Experts said prices here will go on rising until supply ramps up to meet demand.

New figures from the Knight Frank global house price index for the first quarter of the year show Irish property prices are rising rapidly.

Prices here were up 12.7pc in the first three months of the year.

This was behind Hong Kong, where they were up 14.9pc; Malta, which saw rises of 13.6pc; and Iceland, which reported rises of 13.2pc in the three months to March.

Shortage

The compilers of the index said a shortage of supply was a common reason why prices were rising so quickly in Hong Kong, Malta, Iceland and Ireland.

An added factor in this country was the strong economic growth.

Knight Frank said in its report: "In Ireland's case, its burgeoning economy explains its strong performance. Ireland has been Europe's fastest-growing economy for four consecutive years."

Meanwhile, a new report into housing by Ibec has called for moves to boost supply.

Ibec boss Danny McCoy wants Government intervention to drive down the cost of development land.

Measures should include increasing the amount of zoned land, improved targeting of infrastructure funds to enhance site accessibility and more efficient use of publicly-owned landbanks.

However, the prospect of ramping up the supply of housing is increasingly unlikely after the influential think-tank, the ESRI, slashed its projections for the construction of new homes.

It has also said the Central Bank should consider making the banks hold more money in reserve to guard against excessive lending.

The group's recommendations raise the prospect of house buyers finding it more difficult to get a mortgage while the number of new houses on the market lags previous expectations.

It is expecting just 18,700 new homes to be built this year, compared to a previous forecast of 25,000.

The dramatic reduction comes after the Central Statistics Office said last week that the Department of Housing's figures on new homes were overstated.

The ESRI also cut its forecast for new homes built in 2019 to 23,200 from 31,000.

However, analysts at bodies ranging from stockbrokers Davy to estate agents Savills have said that 35,000 extra units a year will be needed.

Dr Conor O'Toole, senior research officer at the ESRI, said the country was further away from meeting the demand for houses than had been previously thought.

He said that while lending risk is being managed "much better" by the banks compared to the Celtic Tiger, this could "quickly unravel".

He said there was no case for loosening the Central Bank's mortgage caps, and that in fact the bank should consider tightening the amount of money available through more methods.

He said asking banks to hold more money in reserve "may be an approach that's prudent" given the state of the market.

"Using these other levers and tightening those may be an appropriate way to manage the cycle going forward," Dr O'Toole said.

He was speaking after Central Bank deputy governor Sharon Donnery told an audience last month that there were "compelling" arguments for introducing such a measure at an early stage, before lending becomes excessive.

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