House prices to soar for at least two years

House prices to soar for at least two years

By Pádraig Hoare and Eamon Quinn

Rising house prices with no end in sight will lead to buyers being priced out of the market, according to experts.

Goodbody forecast house price inflation of 8.5% for 2018 and 6.2% for 2019, which would lead to some potential buyers being priced out of Dublin and sprawl in surrounding counties, according to analyst Colin Jackson.

The firm's chief economist Dermot O'Leary said 765 units were completed in February 2018, a growth of 38% from the same month last year.

However, with less than 10,000 completed in the past year, there remains a significant gap between supply and estimated demand of around 35,000 units, Mr O'Leary said.

"Despite the clear momentum, the construction industry is finding it increasingly difficult to close the gap between supply and demand. With record low level of stock for sale and rent, ongoing price rises are the inevitable result," Mr O'Leary said in his report.

Using Building Energy Ratings (BER) to count new homes, Mr Jackson said Goodbody forecast new supply at around 15,000 this year and 19,500 in 2019, meaning a balancing out of demand with houses built was years away, said Mr Jackson.

He said sustained price inflation meant more people being priced out in the future, with house prices 11.4 times more than disposable income, higher than the long-term average of 10.5.

"We expect this to increase to 12.2 in 2018. To put this into context, in 2007 this metric reached 15.7. This is worse again in Dublin, with the median price/disposable income coming in at 13.7 in 2017.

"The deterioration in affordability means that some potential buyers are priced out of the Dublin market, leading to sprawl to surrounding counties, and first-time buyers are likely to come up against Central Bank lending limits in 2018."

"The Central Bank imposed limits will cause a slight moderation in demand and house prices this year," he said.

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