Modest rise in house prices predicted for 2003

The rise in the cost of houses this year will be modest because of the phenomenal pace of housebuilding, a report published this morning says.

Bank of Ireland' quarterly Irish Property Review predicts the price of second-hand houses will rise by only 5 per cent, while new houses should see little or no gains.

It says the "equilibrium" in the market is put down to record new house completions achieved last year and in 2001, meaning supply has finally met demand.

However, the residential property market will remain buoyant, according to the report, with mortgage lending forecast to exceed the €12.5 billion mark. This represents a further increase of 20 per cent from 2002, which was a record year for mortgage lending.

Bank of Ireland's Chief Economist Dr Dan McLaughlin said: "Irish housing stock now exceeds 1.4 million, representing a 4.2 per cent increase (57,000 houses) in 2002 and a further 60,000 completions are expected by December 2003.

"Contrary to public perception, we are now in a position where, overall, housing supply pretty much satisfies demand.

"This, along with the fact that a record number of people, including first time buyers, are getting mortgages (77,000 people in 2002) indicates that the perceived crisis in the Irish housing sector has abated".

The report also notes that in 2002, house prices increased by 14 per cent nationally, with gains in Dublin at an estimated 16.5 per cent. It predicts that by the end of this year the average second hand house in Ireland will cost €243,000. The corresponding figure for Dublin is €320,000, showing that an average house in the capital now costs 31.6 per cent more that the national average.