House prices have increased by 20% nationally in the past year - FNBS

House prices increased nationally by an average of 20 per cent in the past 12 months, the general managing director of First National Building Society, Mr John Smyth, said yesterday. The increase was twice that recorded by the society in the previous year in its monitoring of price, he said.

Mr Smyth said there were sharp differences in the rate of price increases in different regions, with prices around Dublin increasing by as much as 33 per cent.

Addressing a conference, The Irish Economy into the 21st Century, organised by the Waterford Chamber of Commerce, Mr Smyth said the average secondhand house in Dublin now cost over £150,000. In Waterford the figure was £80,000.

The property market, like every other area of the Irish economy, is booming because of increased numbers at work, inward migration, demographics, and the trend towards single households, he said. However the single most important factor on which the boom is based is the expectation that interest rates will fall on Ireland's entry to EMU. "Inflationary pressures in Ireland and in other EU countries such as the Netherlands and Finland are a threat to the sustainability of these low interest rates and indeed to our economic prosperity as a whole," he said.

Many couples who had seen a significant rise in the value of their homes in recent years, are borrowing on that equity and buying a second home or residential property investment. This was happening across the wide social spectrum. "What we are seeing is the shift away from a purely home ownership culture to an emerging investment ownership culture."

First National does not believe there is a fundamental long-term problem with house prices, as density levels are very low in Ireland compared with Britain, Belgium, Holland and Germany. "The current rise in house prices and problems associated with it seem to be amenable to policy solutions."