The Department of Environment has dismissed fears that the current surge in Dublin house prices could collapse again if cash buyers and investors suddenly exit the Irish housing market.
Financial expert and Irish Examiner columnist Brian Lucey made the observation, while also saying that the current spike in property prices in the capital should “terrify” the Government into taking action.
The Trinity College academic’s comments came after Taoiseach Enda Kenny said there was no new property bubble, despite house prices rising at the highest rate on record.
Central Statistics Office figures this week showed that the cost of buying a house in the capital has surged 24.4% over the past year. House prices in Dublin are now rising at more than seven times the rate of the rest of the country.
Prof Lucey said: “The thing is when you see a 25% year-on-year rise in house prices, that should absolutely terrify people. High house prices are not good for the economy. It should terrify them [the Government] as well and spur them into immediate action.”
The Government’s idea of building thousands of houses next year could help, he said, but many of the problems such as rezoning delays, a lack of credit for developers and landbank hoarding had been known about for years.
The CSO figures show that the average house price in Dublin grew by an extra €20,000 (or €220 per day) since March. Elsewhere, the price of residential properties rose by 2.3%.
Mr Lucey predicted that if cash buyers — estimated to be half those purchasing property — suddenly left there could be a second property price collapse.
“We’ve a very thin market, the market could very easily collapse as the cash buyers disappear which could result in a double dip.
“House prices are not affordable in Ireland,” he told RTÉ’s Morning Ireland.
There was a need to keep average property prices at sustainable levels at around €200,000 when the average wage was €35,000, he said.
But he said alarm bells should be ringing if opportunists and investors were starting to leave.
Responding to his comments, the Department of the Environment disputed that cash buyers were leaving the market. Progress had been made since the publication of the Government’s construction 2020 strategy this year, an official said.
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