BoI predicts slowdown in house price rises

Bank of Ireland is predicting that house price inflation will be 6 per cent for the current year, down from 14 per cent in 2003.

Writing in the bank's quaterly Irish Property Review, Bank of Ireland's chief economist, Dr Dan McLaughlin said the six per cent increase would bring the price of an average house in Ireland to EUR291,000 and to EUR385,000 in Dublin.

According to the quarterly review, compiled from data from all Irish lending institutions, the forecast is based primarily on the expected growth in employment in the year ahead, the possible delay in an interest rate increase and another year of record numbers of new houses coming on stream.

Despite the euro's recent appreciation against the dollar and the belief of some economic commentators that there will be a further rate cut by the ECB, Dr McLaughlin expects that the Irish mortgage borrower will experience a rate increase in 2004.

The Irish Property Review does predict however that the rate increase will be pushed further into the future than the Spring date which had been envisaged.

On the subject of interest rates, Dr. McLaughlin said: "Higher interest rates looked on the cards in the first half of 2004 but the market is now expecting a longer period of unchanged rates with some prepared to bet on a rate cut."

The trend highlighted by the Review last year regarding the growing differential between house prices in the capital when compared with the rest of the country eased slightly towards the end of 2003 according to an analysis of the latest figures.

The differential now stands at 32 per cent, compared to 37 per cent in early 2003, due mainly to a fall of 4.5 per cent in Dublin house prices in the third quarter .