Property demand to stay strong

Demand for property is unlikely to decline significantly over the next two years, according to IIB Homeloans' annual review of the Irish housing market.

While interest rates will rise by as much as three-quarters of a percentage point by the end of the year, they are unlikely to impact significantly on the market in 2005, IIB chief economist Mr Austin Hughes says.

However, he does expect some "cooling" in the rate of house price inflation, which IIB says will average 7 per cent this year, down from around 9 per cent in 2004. The IIB figure is still at the upper end of analysts' forecasts.

IIB Homeloans chief executive Mr Brian MacManus, said: "We have seen a surge in borrowing demand of late. Indeed, such is the strength of our lending pipeline... that we have revised upwards our forecasts for house price inflation."

Mortgage borrowing in 2004 hit €18 billion, according to the lender, which estimates that rising house prices added a "staggering" €30 billion to the wealth of Irish homeowners last year.

It sees higher property values as a key driver of the economy, with consumer spending rising as homeowners unlock equity from their property.