Soaring prices threaten house market

THE CONTINUOUS rise in house prices, at a time when incomes have only jumped slightly, has increased the possibility of a crash, the Central Bank warned yesterday.

While forecasting strong growth of 5% for 2006, Central Bank governor John Hurley said economic fundamentals do not justify the sharp rise in house prices to 14%, compared to just 7% last year.

“The recent re-acceleration in house prices increases, well in excess of the increase in nominal incomes, is a concern and has increased the risk of a sharp correction in the market,” he said.