Consumers predict rise in house prices

IRISH consumers are expecting house prices to rise by around 5% this year and do not believe there will be a crash in property prices.

Despite reports from the Economist magazine and the Central Bank that house prices could see significant falls, Irish consumers anticipate the housing market to have a soft landing.

A survey by IIB Bank and the ESRI of consumer attitudes on the housing market found that the majority of consumers expect house prices to continue appreciating, while only one in 10 expect a crash.

A report earlier this year on the Irish property market by the respected Economist magazine found that there was a risk that house prices could collapse by 20% or more. This month the Central Bank said it was concerned about the continued rise in house prices and urged the banks to be prudent in their lending policies.

But IIB Bank chief economist, Austin Hughes, said yesterday that the housing market showed no evidence of a bubble.

“Six out of ten Irish consumers expect house prices to increase, with one third of this group expecting a substantial rise and two thirds a more modest gain.”

So far this year, house prices have risen by more than 15%, while new figures from the Department of Environment this week showed prices were up by 13%.

Mr Hughes said any action by the Government to intervene in the market could have adverse affects. He pointed to previous intervention by the Government some years ago which forced investors out of the market and led to a drop in prices.

The IIB/ESRI research also found that only three out of every 100 consumers expect a 20% rise in prices or 10% fall in prices with most people expecting prices to remain flat.

On the downside for builders and developers, of the 1,100 people surveyed, 86% said they would “certainly not” consider buying a house in the next two years.

But Mr Hughes said that with one in 10 considering buying in the next couple of years, it still means there will be demand for 150,000 new houses.

The survey found that economics growth is the main factor influencing house buyers with the current low interest rate environment the next most important factor when considering whether to buy a house.

It also found that expectations for house prices of home-owners are not notably different from those who have not purchased.

“It might have been expected that no-owners would have had more extreme views on the outlook for the Irish property market,” Mr Hughes added.

David Duffy of the ESRI said that people who are educated to third level standard are three times more likely to purchase a home than those who educated to only Junior Cert level.