Dublin has experienced one of the highest rates of property price inflation of any city in the world over the past five years, according to the International Monetary Fund (IMF).
In a special report on house prices and financial stability included in its latest global outlook report, the Washington-based fund ranked 22 cities in advanced economies on the basis of annual real house price growth since 2013.
It found Dublin came top with an average growth rate of just over 10 per cent a year. This was higher than Auckland, Sydney, Toronto and Oslo, which have all experienced property price booms during the period. It also placed the Irish capital ahead of cities such as Tokyo, London and New York.
The IMF’s “Global Financial Stability Report” does not focus on the housing markets of specific countries but “takes a general view on the broad cross-country patterns in housing prices, and their effect on financial stability,” an IMF spokeswoman said.
“The chapter aims to strengthen our understanding of global trends. That can help develop tools which can be later applied to each country’s context,” she said.
The report said large house price declines, such as those seen here after the 2008 financial crash, can adversely affect the macroeconomic performance and financial stability of a country.
“In this context, the rapid increase in house prices in many countries in recent years has raised some concerns about the possibility of a decline and its potential consequences,” it said.
In its report, it noted that more than two-thirds of the nearly 50 systemic banking crises in recent decades were preceded by boom-bust patterns in house prices.
The 2007-2008 global financial crisis is a case in point, in which the housing crisis spilled over on to other sectors and resulted in a full-blown crisis, the IMF said.
The report also highlights an increasing level of synchronicity in housing markets worldwide with a marked similarity in price trends.
It concludes that a tightening of macroprudential policies akin to the action taken by the Central Bank here reduced the downside risks to house prices.
“This is especially the case for policies aimed at strengthening the resilience of borrowers, such as limits to the maximum loan-to-value or debt-service-to-income ratios,” it said.
A recent slowdown in property price growth particularly in Dublin has been linked to the Central Bank’s lending restrictions.
The pace of growth slowed to 1.9 per cent year on year in Dublin in January, the latest official figures show.
Nationally annualised growth in house prices was clocked at 5.6 per cent in January, the slowest pace of growth since June 2016.
This compared with an increase of 6.4 per cent in the year to December and a rise of 11.8 per cent the same time last year.