House prices are likely to continue rising with people on average incomes priced out of the market, according to a report from NCB Stockbrokers.
The Irish housing market is set for continued growth of between 10 and 20 per cent this year with no slowdown in sight, according to NCB economist, Mr Eunan King, author of the new report The Irish Housing Market - Fundamental Strengths.
According to Mr King, the main factors underpinning strong growth in the housing market are the strong domestic economy as well as the rising number of people reaching home-buying age, continued strong inflows of immigrants and the declining size of households.
The key is really the extent to which we outperform the UK and the US as this determines the numbers of migrants coming into Ireland, he said.
There is also little on the supply side to hold back the market as Government measures to take the steam out of the sector have been very slow to take affect, Mr King noted. In 1999 only 1,500 new sites will become available in Dublin, while measures to target investors have resulted in higher rents and subsidies to help first time buyers simply go into the price of the home.
Already the number of investors in the market is back at pre-Bacon levels or about 20 per cent of the market, according to Irish Permanent economist, Ms Jane Kelly, whose data underpins much of the report.
The situation, according to Mr King, can be thought of as the reverse of that in the 1980s when exporting companies in Ireland prospered as world trade expanded. Domestic demand conditions were, however, poor and employment fell over the decade. Now export companies may do rather less well but domestic demand conditions are favourable.
The report also highlights the absence of so-called over-borrowing. According to Mr King, the data does not suggest that either the quality of the loan book is deteriorating or that borrowers are becoming more stretched.
According to Irish Permanent data, which accounts for about 23 per cent of the market, the average loan to value ratio was just 62 per cent in 1998 with an average for first time buyers of only 72 per cent. One very marked affect is that the average borrower is much wealthier than ever before. In 1997 the income of the average borrower rose some 13 per cent and the average loan by 14 per cent. This reflected a large shift away from lower income people to those on higher incomes. This represents more lending to migrants in higher paid employment as well as significant numbers of investors and more people holding onto their first home when buying the next.
