Modest property market growth expected - report
Modest house price growth is the outlook for the property market for the remainder of 2002, according to a report published by the Bank of Ireland yesterday evening.
Overall, this means a four to five per cent gain for the year, according to the Irish Property Review published by Bank of Ireland Treasury and International in conjunction with Bank of Ireland Group Mortgages.
The value and returns for industrial and office investments are likely to remain under pressure in the near term whereas the retail market remains robust with rents and yields holding, the report says.
Equilibrium in the residential market is primarily due to the balance achieved between supply and demand. The report reveals that there was a new record of 52,600 house completions in 2001 representing a 4 per cent increase in housing stock in Ireland.
This is despite the building industry’s estimation last year that this figure would be around the 40,000 mark.
The substantial increase in supply is offset by a surge in demand from both first time buyers and investors following Budget 2001.
Dr Dan McLaughlin, Bank of Ireland’s Chief Economist, speaking at the publication of the Irish Property Review said the market has opened on a brighter note this year with house prices up by an estimated 3 per cent.
"This recent pick-up in prices is very welcome but we do not see that it will result in growth rates above our current forecasts for the full year," Mr McLaughlin said.
Affordability, the cost of servicing a mortgage relative to income and a key indicator of the sustainability of house prices, is expected to improve in 2002 as pay increases will offset increases in mortgage size and borrowers continue to benefit from the fall in mortgage rates in the second half of 2001.
The report states, however, that affordability may deteriorate in 2003 due to rising interest rates.
Bank of Ireland suggests that this level will be some distance from the danger levels associated with falling house prices and would not be expected to have a significantly negative impact on mortgage demand.
The number of new mortgages fell sharply in 2001 to 66,783, approximately 10 per cent below the 2000 total of 74,258.