House price increases will slow down - AIB

The rate of increase in house prices is set to ease, the country’s largest bank claimed today.

According to AIB house price inflation is moderating as the balance between supply and demand adjusts and the bank has predicted further price moderation in the months ahead.

AIB’s experts forecast house price inflation will stand between 3% and 6% by the end of next year as the market moves towards a much anticipated soft landing.

John Beggs, chief economist with AIB, warned there was a small risk of a housing market crash.

“While such a correction could have dire consequences for the economy, at least in the short term, the risks are low,” he said.

“Our latest report on the housing market remains quite optimistic on the outlook for the sector in 2007 and 2008. We do not envisage a hard landing or crash in either property prices or in construction output.

AIB said the number of new homes coming on to the market would continue to rise.

Mr Beggs added: “We expect new peaks in output in 2006 with house completions set to reach 93,000 units, with only a moderate downtrend thereafter. More importantly, we also see the opportunity of a deceleration to moderate price gains over the medium term.”