Many people fear a new property bubble has built up and will burst.
Concerns about a looming crash have been raised after the property price index hit levels last seen during the peak of the Celtic Tiger boom in 2007.
We asked eight housing experts for their views.
They expect property price inflation to ease from its current rate of 14pc and point to demand continuing to be strong due to rising employment and a large number of reluctant young renters.
More responsible mortgage lending over the past few years should ensure the market avoids the devastating collapse experienced when the Celtic Tiger property bubble burst more than a decade ago.
However, prices would soften, the experts said.
Kieran McQuinn, research professor at the Economic and Social Research Institute ( ESRI), said property price rises were set to ease off from the runaway rates reported by the Central Statistics Office (CSO) last week.
Prof McQuinn, one of whose specialist areas is housing, said those levels of price rises would ease off over the next year, but we were still due to see “robust” price growth.
He said the housing market would face opposing forces over the next year.
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Inflation and rising construction costs mean housing supply levels are not likely to grow as much this year as previously thought.
“With the Irish economy still expected to grow significantly over the next 12 months and the labour force witnessing particularly low unemployment rates, housing demand is still set to register robust growth over the period,” Prof McQuinn said.
Orla Hegarty, assistant professor at the School of Architecture, Planning and Environmental Policy in UCD, said the outlook for the property market was uncertain.
She said the crash in values after 2008 caused enormous pain and distress, to both individuals and the economy, but now house prices were back at Celtic Tiger levels. “An opportunity was lost to reset the market to mitigate boom-and-bust cycles and hold housing at a level that kept the economy competitive,” she said.
“As a result, the system is again vulnerable to an uncontrolled adjustment triggered by external or internal events.
“With the likelihood of recession and rising interest rates, there are risks of uncertainty in speculative investment, and a stall in supply.”
Prof Hegarty said urban prices were now far beyond the reach of the traditional first-time buyers setting up a home, looking to make an investment that was within their own means, adequate for a future family and with security in retirement.
“Something has to give. Only time will tell if it is triggered by events or a change in government policy,” she added.
Dr John McCartney, director and head of research at BNP Paribas Real Estate, believes house price and rent inflation will slow, but he does not expect any fall in prices or rents.
He expects 28,000 new dwelling completions this year, despite rising building costs being a drag on output.
“But enough units are already in train to sustain strong output through the remainder of this year and 2023,” Dr McCartney said.
He added that international investors would continue to be attracted by Ireland’s demographic profile and favourable economic outlook.
But rising interest rates may also begin to affect the pricing of investment properties.
“Overall, I think the market is gradually becoming more balanced. Reflecting this, house price inflation has cooled slightly, and this should continue, possibly at a faster rate,” he said. “Rents have not cooled yet, but rental trends tend to follow prices in the medium term.”
Co-director of the trade union-supported Nevin Economic Research Institute (NERI), Dr Tom McDonnell, said the housing market had been in a state of dysfunction of one form or another for close to two decades.
Estate agents who are members of the Society of Chartered Surveyors Ireland (SCSI) expect the rate of property price rises to ease to an annual rate of 4pc over the next year.
John O’Sullivan, chair of the SCSI practice and policy committee, said annual rates of inflation of 14pc or 15pc, which we have seen recently, were simply not sustainable in the long term.
Asked whether the market would crash, economist Austin Hughes said sharply higher energy and food bills would limit home-buyers’ ability to save for a deposit and service a large mortgage.
He added that the European Central Bank was expected to raise rates by between 1 percentage point and 1.5 percentage points by early 2023, further hitting affordability.
Another major shadow is a threatened global downturn that could hit Irish employment and incomes.
Further economic and financial fallout from the invasion of Ukraine may be substantial, leading some to hesitate about large and long-lasting financial commitments.
Although these factors may hurt property prices and transactions, strong forces are acting in the opposite direction.
But a severe decade-long shortfall in new building, amplified by strong population growth, means unmet demand is substantial.
Mr Hughes said the last crash taught him never to say never. “Although the next 12 months could be turbulent, barring an unexpectedly deep global slump, a marked Irish property downturn shouldn’t happen,” he said.
“Instead, we may move – probably in a bumpy fashion – to smaller sustainable property price increases.”
He added that Central Bank lending limits should guard against any cyclical slowdown that may occur in the coming 12 months. “In addition, there remains a structural shortage of housing supply in Ireland that is not going to be resolved in the near term,” he added.
“At the same time, there is sufficient demand for property that is unlikely to dissipate altogether despite rising mortgage interest rates.”
Mr McDonnell said this meant Goodbody expected prices to continue to grow next year, albeit at a slower pace than had been seen.
Architect Mel Reynolds said we could expect “speed bumps” rather than a crash.
This was due to the fact that uncertainty and negative public sentiment would mean some new house-building projects may now be deferred.
Tldr prices wont fall
Theres no “bubble” it’s a massive undersupply that can’t be fixed anytime within the next 5-10 years.
So what happens – as the experts say “something has to give”
With undersupply – prices don’t fall. So people go elsewhere – emigration will start it, then companies won’t get workers, multinationals won’t be able to house workers, so less jobs – it will eventually lead to a market crash – not a housing market crash. Jobs will go etc etc.
If market is corrected in next 3ish years, we’re probably looking at a decade of recession.
Unless the delta between population growth and new housing supply match , house prices will not slow. This year alone 150k work visas will be issued. A similar amount of EU workers will arrive plus, > 50k refugees so far since march with 1000 arriving per month. This is not going to get better is the bottom line.
My take on this has always been about demand.
Demand is white hot. Supply is shit. Supply will remain shit, potentially getting shitter. It’s all on the demand side. So then it comes down to recession and layoffs. Making no predictions on it but that’s where I’d bet any real price drop comes.
Another thing these commentaries often seem to ignore is the ECB have said with interest rate hikes there could be a correction in house prices in the broader European market.
Specifically: “They could fall between 0.83 and 1.17 per cent for every 0.1 percentage point increase in mortgage lending rates, after adjusting for inflation, the ECB calculated.” For context the ECB’s last hike a few months ago was 0.5%.
I’ll play devil’s advocate seen everyone else is basically saying the exact same thing.
Supply and demand are at a point in time and that can change very quickly, we have seen large migration of workers and companies but highly mobile now means highly mobile in the future too and all it takes is a large shock to one industry or government policy change somewhere else for an exodus.
Interest rates are still historically low and there is zero sign of more competition coming to the Irish market, these 2 together are likely to play the biggest role. That 400k house that you can get a mortgage for now and repayments are 25% less than your current rent, that’s all based on current rates, the ECB have said a rate of 4.5% is ideal, add on the premium for the Irish rates and suddenly that 400k isn’t available to the person who could afford it last year.
Lastly, there is likely a recession coming and will that have a direct effect on the housing market prices, at the moment probably not but is there other factors that could have a huge effect on the market and we haven’t even considered could happen, definitely yes.
This is just a devil’s advocate post but if everyone is singing off the same hymn sheet when discussing the housing market, it’s time to consider what else could happen.
Wait until vulture funds start unloading, that’ll be a megaton bubble burst.
Alot of people don’t think prices will fall but there are literal crack dens going on the market for 100k+ something has to give eventually
12 comments
Many people fear a new property bubble has built up and will burst.
Concerns about a looming crash have been raised after the property price index hit levels last seen during the peak of the Celtic Tiger boom in 2007.
We asked eight housing experts for their views.
They expect property price inflation to ease from its current rate of 14pc and point to demand continuing to be strong due to rising employment and a large number of reluctant young renters.
More responsible mortgage lending over the past few years should ensure the market avoids the devastating collapse experienced when the Celtic Tiger property bubble burst more than a decade ago.
However, prices would soften, the experts said.
Kieran McQuinn, research professor at the Economic and Social Research Institute ( ESRI), said property price rises were set to ease off from the runaway rates reported by the Central Statistics Office (CSO) last week.
Prof McQuinn, one of whose specialist areas is housing, said those levels of price rises would ease off over the next year, but we were still due to see “robust” price growth.
He said the housing market would face opposing forces over the next year.
Enter email address This field is required Sign Up
Inflation and rising construction costs mean housing supply levels are not likely to grow as much this year as previously thought.
“With the Irish economy still expected to grow significantly over the next 12 months and the labour force witnessing particularly low unemployment rates, housing demand is still set to register robust growth over the period,” Prof McQuinn said.
Orla Hegarty, assistant professor at the School of Architecture, Planning and Environmental Policy in UCD, said the outlook for the property market was uncertain.
She said the crash in values after 2008 caused enormous pain and distress, to both individuals and the economy, but now house prices were back at Celtic Tiger levels. “An opportunity was lost to reset the market to mitigate boom-and-bust cycles and hold housing at a level that kept the economy competitive,” she said.
“As a result, the system is again vulnerable to an uncontrolled adjustment triggered by external or internal events.
“With the likelihood of recession and rising interest rates, there are risks of uncertainty in speculative investment, and a stall in supply.”
Prof Hegarty said urban prices were now far beyond the reach of the traditional first-time buyers setting up a home, looking to make an investment that was within their own means, adequate for a future family and with security in retirement.
“Something has to give. Only time will tell if it is triggered by events or a change in government policy,” she added.
Dr John McCartney, director and head of research at BNP Paribas Real Estate, believes house price and rent inflation will slow, but he does not expect any fall in prices or rents.
He expects 28,000 new dwelling completions this year, despite rising building costs being a drag on output.
“But enough units are already in train to sustain strong output through the remainder of this year and 2023,” Dr McCartney said.
He added that international investors would continue to be attracted by Ireland’s demographic profile and favourable economic outlook.
But rising interest rates may also begin to affect the pricing of investment properties.
“Overall, I think the market is gradually becoming more balanced. Reflecting this, house price inflation has cooled slightly, and this should continue, possibly at a faster rate,” he said. “Rents have not cooled yet, but rental trends tend to follow prices in the medium term.”
Co-director of the trade union-supported Nevin Economic Research Institute (NERI), Dr Tom McDonnell, said the housing market had been in a state of dysfunction of one form or another for close to two decades.
Estate agents who are members of the Society of Chartered Surveyors Ireland (SCSI) expect the rate of property price rises to ease to an annual rate of 4pc over the next year.
John O’Sullivan, chair of the SCSI practice and policy committee, said annual rates of inflation of 14pc or 15pc, which we have seen recently, were simply not sustainable in the long term.
Asked whether the market would crash, economist Austin Hughes said sharply higher energy and food bills would limit home-buyers’ ability to save for a deposit and service a large mortgage.
He added that the European Central Bank was expected to raise rates by between 1 percentage point and 1.5 percentage points by early 2023, further hitting affordability.
Another major shadow is a threatened global downturn that could hit Irish employment and incomes.
Further economic and financial fallout from the invasion of Ukraine may be substantial, leading some to hesitate about large and long-lasting financial commitments.
Although these factors may hurt property prices and transactions, strong forces are acting in the opposite direction.
But a severe decade-long shortfall in new building, amplified by strong population growth, means unmet demand is substantial.
Mr Hughes said the last crash taught him never to say never. “Although the next 12 months could be turbulent, barring an unexpectedly deep global slump, a marked Irish property downturn shouldn’t happen,” he said.
“Instead, we may move – probably in a bumpy fashion – to smaller sustainable property price increases.”
He added that Central Bank lending limits should guard against any cyclical slowdown that may occur in the coming 12 months. “In addition, there remains a structural shortage of housing supply in Ireland that is not going to be resolved in the near term,” he added.
“At the same time, there is sufficient demand for property that is unlikely to dissipate altogether despite rising mortgage interest rates.”
Mr McDonnell said this meant Goodbody expected prices to continue to grow next year, albeit at a slower pace than had been seen.
Architect Mel Reynolds said we could expect “speed bumps” rather than a crash.
This was due to the fact that uncertainty and negative public sentiment would mean some new house-building projects may now be deferred.
Tldr prices wont fall
Theres no “bubble” it’s a massive undersupply that can’t be fixed anytime within the next 5-10 years.
So what happens – as the experts say “something has to give”
With undersupply – prices don’t fall. So people go elsewhere – emigration will start it, then companies won’t get workers, multinationals won’t be able to house workers, so less jobs – it will eventually lead to a market crash – not a housing market crash. Jobs will go etc etc.
If market is corrected in next 3ish years, we’re probably looking at a decade of recession.
Wow am an expert now.
LoL.
[https://www.reddit.com/r/AusFinance/comments/w7j317/comment/ihn64nr/?utm_source=share&utm_medium=web2x&context=3](https://www.reddit.com/r/AusFinance/comments/w7j317/comment/ihn64nr/?utm_source=share&utm_medium=web2x&context=3)
https://www.reddit.com/r/ireland/comments/vfe0k2/comment/icvacu1/?utm_source=share&utm_medium=web2x&context=3
Don’t give us hope
Fears!? More like hopes
Unless the delta between population growth and new housing supply match , house prices will not slow. This year alone 150k work visas will be issued. A similar amount of EU workers will arrive plus, > 50k refugees so far since march with 1000 arriving per month. This is not going to get better is the bottom line.
My take on this has always been about demand.
Demand is white hot. Supply is shit. Supply will remain shit, potentially getting shitter. It’s all on the demand side. So then it comes down to recession and layoffs. Making no predictions on it but that’s where I’d bet any real price drop comes.
Another thing these commentaries often seem to ignore is the ECB have said with interest rate hikes there could be a correction in house prices in the broader European market.
Here’s an article from the IT talking about it: https://www.irishtimes.com/business/economy/2022/05/25/ecb-warns-a-house-price-correction-is-looming-as-interest-rates-rise
Specifically: “They could fall between 0.83 and 1.17 per cent for every 0.1 percentage point increase in mortgage lending rates, after adjusting for inflation, the ECB calculated.” For context the ECB’s last hike a few months ago was 0.5%.
I’ll play devil’s advocate seen everyone else is basically saying the exact same thing.
Supply and demand are at a point in time and that can change very quickly, we have seen large migration of workers and companies but highly mobile now means highly mobile in the future too and all it takes is a large shock to one industry or government policy change somewhere else for an exodus.
Interest rates are still historically low and there is zero sign of more competition coming to the Irish market, these 2 together are likely to play the biggest role. That 400k house that you can get a mortgage for now and repayments are 25% less than your current rent, that’s all based on current rates, the ECB have said a rate of 4.5% is ideal, add on the premium for the Irish rates and suddenly that 400k isn’t available to the person who could afford it last year.
Lastly, there is likely a recession coming and will that have a direct effect on the housing market prices, at the moment probably not but is there other factors that could have a huge effect on the market and we haven’t even considered could happen, definitely yes.
This is just a devil’s advocate post but if everyone is singing off the same hymn sheet when discussing the housing market, it’s time to consider what else could happen.
Wait until vulture funds start unloading, that’ll be a megaton bubble burst.
Alot of people don’t think prices will fall but there are literal crack dens going on the market for 100k+ something has to give eventually
And by ‘fears’ they mean hopes, right?