Concern for property investors

FURTHER warnings of a house price bubble have been given by one of the country’s leading economists.

Again the danger is seen in the buy-to-let market where rents have been falling.

Top economist Robbie Kelleher, of Davy Stockbrokers, says the property market is the last green bottle left standing on the crumbling wall of the Irish economy.

Over lending by the banks and over borrowing by investors could bring the rental market tumbling down in six to nine months, Kelleher warned yesterday.

Long time sceptic about our immediate economic prospects, Kelleher believes much worse is to come in terms of job losses as the US economy teeters on the brink of recession.

As the Irish economy slows down further people will not be able to meet their repayments, putting house prices under severe pressure for the first time since prices started to boom.

Estate agents strongly disagree. But a recent survey by Gunne, one of the biggest agents in the housing market, showed that rental income has fallen in the greater Dublin area.

Kelleher, however, is the second senior Irish economist to raise the spectre of a property bubble hanging over us.

Commenting recently Don Walshe, senior researcher with Goodbody Stockbrokers, an AIB subsidiary, said it was time to start highlighting the danger of a property bubble given the current economic circumstances.

While he thought the danger slight it was the first time he felt compelled to point out the impending danger to house prices in the months ahead.

However, the most recent Central Bank statistics show a massive increase in the lending level for house purchase for September.

Over that period 952m was lent for new home purchase - up 22%.

Kelleher sees investors as key players, but fears for them in the future.

Many buy in the hope of renting.

However, as the economy slows his concern like Walshe’s is can prices hold up as the economy slows and unemployment rises?

The lending figures suggest many owner occupiers and investors are stretching themselves financially, while financial institutions have been pouring money into the sector ignoring the danger that too much funding is stoking the flames.

Estate agents have reacted angrily to the allegations.

Aidan O'Hogan, managing director, Hamilton Osborne King, believes consumers can finance their borrowings thanks to low interest rates, despite high personal borrowing levels.

While the rental market will slow, he still sees demand.