Nama ‘should intervene’ to stop new bubble

Nama should intervene to ensure that a house price bubble does not form in the Dublin market, said chief economist with Goodbody Stockbrokers, Dermot O’Leary.

After one of the steepest house price crashes among OECD countries, a new property cycle is emerging as the domestic economy recovers. He cites international comparisons which show that in a crash of this magnitude, house prices decline for six years and then grow by on average 6% each year.

“A similar occurrence in Ireland would mean that 40% of the drop in prices would be recovered within five years, leaving prices still down 30% from the peak,” said Mr O’Leary in a new study on the property market

However, it is going to be a multi-speed recovery. Dublin house prices increased by 11% over the past 12 months, whereas they are still falling in the rest of the country. He said there is a shortage of supply in Dublin, particularly in the south of the city, which means that new building is required immediately.

The latest mortgage approval figures released by the Irish Banking Federation show that 1,776 mortgages were approved in August, of which 1,637 (92%) were for house purchase. This is up 11.1% compared with Aug 2012, although it fell by 5.3% compared with the previous month. The value of mortgages approved was €297m.