House prices will rise by 8 per cent this year as Irish people continue to invest their growing wealth in property, according to mortgage lender IIB.
"An astonishing build-up in property wealth in the past 10 years represents a key support for the Irish housing market in the future," Mr Tom Foley, chief executive of IIB Homeloans, told a seminar in Dublin today.
"The property market remains the people's pension of choice at present. Set alongside surging immigration and increasing spending power, it implies that 2006 should be another strong year of property market activity, as well as one which sees solid increases in house prices" said Mr Foley.
"While it would be wrong to be complacent about the build-up in debt in recent years, the reality is that a massive rise in property-related wealth is the often entirely neglected other side of the same coin", noted Mr Foley.
According to research by IIB chief economist Austin Hughes, Irish housing wealth (the market value of housing less housing-related debt) has risen 350 per cent since 1996, from an estimated €83 billion to €375 billion at the end of 2005.
"This increase has been altogether faster than property gains elsewhere. Irish property wealth has risen from just over twice the economy-wide after tax income of Irish households in 1996 to more than four times their income in 2005," Mr Hughes said.
Over the same period, a similar measure for the United States has risen from 0.8 to 1.2 times household income.
"So, in terms of wealth, the housing market is almost four times as important to the Irish economy as it is to the US. This is because Irish property owners, unlike their US counterparts, have continued to accumulate rather than tap into the wealth garnered through higher house prices in recent years," according to Mr Hughes.
"The build up of housing wealth reflects the buoyancy of demand for housing in Ireland. Strong demand is likely to remain a feature of the market in the coming year for a range of reasons," Mr Hughes said.