The caution comes as the latest figures from the Central Statistics Office show that property prices have risen by more than 70% in less than five years.
The thinktank’s housing assessment came on the same day that the Central Bank’s deputy head, Sharon Donnery, separately warned about households taking on more debt, saying that forecasts for further house price increases have increased, while rents have already climbed above levels before the 2008 property crash.
However, both the ESRI, in its latest quarterly report, and the Central Bank in its macro-financial review — which weighs the risks facing the financial system, households and firms — reaffirmed their confidence that the regulator’s mortgage lending controls are working to help prevent a new market crash.
ESRI research professor, Kieran McQuinn, told reporters that although mortgage credit is growing rapidly, there was no evidence of a bubble in the housing price market. House prices could, however, continue to rise “for the next five, six, seven years”, Mr McQuinn said, as lack of supply drives the market.
The ESRI also said there is a potential threat to indebted households when the ECB finally starts to hike rates.
Ms Donnery said that households are still heavily in debt: “A large share of that debt, including mortgage debt, is susceptible to increases in interest rates, including ECB policy rates.”
Meanwhile, the CSO’s latest Residential Property Price Index release shows that the median price of a residential property in Ireland in October was €220,000, with the highest median recorded in Dún Laoghaire-Rathdown (€513,500), and lowest in Longford (€76,000).
While residential property prices at national level rose by 12.1% in the 12 months to October 2017, they have increased by 70.2% since they plateaued in early 2013.
Residential property in Dublin is now 86.4% more expensive than it was when prices bottomed out in the capital, while prices in the rest of the country are 61.9% higher than at their lowest point in 2013. Year-on-year, Dublin house prices increased 11.6% in the 12 months up to October, with apartments in the capital rising 12.1% in the same period.
Excluding Dublin, house prices increased 12.5% over the same period, with apartment prices going up 15.9% in the same timeframe.
The 10 most expensive Eircode areas by median price are all in Dublin, the highest being A96 ‘Glenageary’ where the median price of property came in at €623,615.
The least expensive Eircode area in the year to October was H23 ‘Clones’ (Co Monaghan) with a median price of €55,000.