House prices will rise 10% this year across the State and climb at even faster pace outside of Dublin, fuelled by the Government’s Help to Buy scheme and the Central Bank’s loosening of its mortgage lending controls, Davy Stockbrokers has predicted.
In new forecasts, the broker also forecasts GDP will surge 5% this year – up from 3.7% growth in an earlier outlook -- before growth slows to 3.8%, in 2018.
Davy has leapfrogged Investec Ireland in predicting the highest growth rate this year among 14 forecasters of the Irish economy. The Department of Finance predicts GDP will grow 4.2% this year and by 3.5% in 2018.
The broker cautions that some of the growth is again down to the influence of multinationals transferring intellectual property into the country. Such accounting transfers have no significant bearing on real economic activity, however.
On house prices, chief economist Conall MacCoille said that areas outside Dublin will again likely rise sharply.
“Those areas where the recovery started later saw up to 16% house price growth, so the catch-up will continue,” Mr Mac Coille said.
In the South West, he predicts that house prices will increase by 12% again this year. Dublin residential prices last year rose 5.8% and surged by 16% in the South East.
The broker said recent movements in asking prices suggested transaction prices after a lag will sustain strong momentum through this year.
“The Help-to-Buy scheme and the loosening of the Central Bank rules have added fresh impetus to Irish house price inflation. We have accordingly revised up our forecast for Irish house price inflation to 10% through 2017.
"With residential transaction and mortgage approval volumes showing strong growth early in the year, we have also revised up our forecast for mortgage lending in 2017 from €6.9bn to €7.5bn,” Mr Mac Coille and David McNamara predict.
Higher-than-expected GDP will mean the Government will face more political pressures to spend on tax cuts and spending increases in its budget 2018.
But Davy warns the prospects of a hard Brexit would make it “foolish” for the Government to increase the size of future budget packages.
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