House prices outdo experts’ forecasts to rise 11.5% in 2004
Economists this time last year forecast prices to increase on average by 10%. However, their prediction that prices would grow at a slower rate was accurate, with price rises considerably lower than the past two previous years.
The same economists are again forecasting slower growth this year as house-buying hunger begins to abate and supply continues to rise at record levels.
The cost of buying a home in Ireland has rocketed since the Celtic Tiger economy first roared in the late 1990s.
The country now has some of the most expensive real estate in the world; the average price paid for a house in Ireland was €253,769 in November.
House prices will rise by 11.5% on average in 2004, but economists are saying that growth will halve to just 5.5% in 2005.
In 2003 and 2002, house prices grew by 13.7% and 13.3% respectively, according to the Permanent TSB/ESRI House Price Index survey.
The Economic Social Research Institute (ESRI) said homeowners spent €4.5 billion in 2004 buying a second property, either buy-to-let or a holiday home.
The ESRI estimates 20,000 of the 70,000 housing completions in 2004 fell into this bracket.
“We wouldn’t expect a significant appreciation next year, given that rents are still falling and given that we’re in a position where supply has at least caught up with demand,” said Rossa White, economist at Davy stockbrokers. “I wouldn’t be surprised if we had a few years when we had 2% to 3% growth.” The central bank warned earlier this year that a sudden end to the country’s property boom posed one of the most serious risks to the country’s buoyant economy and jobs market.
But economists do not expect a sharp drop, given predictions of strong economic growth in Ireland.
Economists raised slightly their estimates for 2004 gross domestic product (GDP) growth.
The poll put the mid-range forecast for GDP growth at 5.4%. November’s survey foresaw growth of 5.25%.
In 2005, GDP growth is seen at 5.0%, rising to 5.5% in 2006, the latest poll showed - unchanged from the previous forecast.
The outlook for inflation has improved. Growth in the consumer price index (CPI) is expected to average 2.5% in 2005, down from last month’s estimate of 2.7%.
