Merrion projects house prices to rise through 2016

House prices are likely to rise again rapidly as the economy posts another set of strong economic growth numbers through 2016, a major stockbroking firm has predicted.

Merrion Capital is the latest forecaster to project that recent tailwinds driving exceptionally rapid recovery in Ireland will extend though next year, despite the troubles emerging in China.

It says that GDP will surge by 6% this year and continue to grow, by 5% in 2016, while unemployment will fall next year to an average rate of 8.8% from 9.6% in 2015.

“But from an Irish perspective, while the world economy as a whole may be stuttering, its key trading partners are among the shining lights on the global stage which will, in our view, only help to keep Ireland at the top of the eurozone growth league table for another couple of years at least,” said chief economist Alan McQuaid.

Exports will remain robust, but may no longer be key driver for the economy .

Instead, personal spending will rise 3.5% this year and increase 4% in 2016, meaning that consumers will be back spending in significant numbers for the first time since the banking crash. House prices will likely be squeezed higher.

“A lack of supply of houses has clearly pushed up prices, particularly in the Dublin area in the past couple of years, but it is not something that can be rectified overnight,” said Mr McQuaid.

“There was an average increase of 12.9% in house prices in 2014, up from 1.8% in 2013. Taking all factors into consideration, we are now looking for an average increase of around 11% for 2015 and 6% for 2016.”

Merrion agrees with the ESRI, which warned the Government last week against cutting personal taxes, arguing that the economy was already growing fast enough not to need any further stimulus.

Mr McQuaid said tax revenues allowed the Coalition “to deliver a sizeable fiscal stimulus to the economy and workers in the forthcoming budget ahead of the general election”, but Ireland remains vulnerable to economic shocks from abroad.

“The last thing the country needs right now is some bad political mis-management, which could jeopardise all the hard work done in recent years, just to win some votes at election time,” said Mr McQuaid.