"Significant degree" of overvaluation in Irish housing market
There is a "significant degree of overvaluation in the Irish residential property market", according to a new study.
The Economic & Social Research Institute has found that Irish house prices are currently about 17% above the level that would be consistent with levels of economic fundamentals such as incomes, interest rates and demographics.
It said the sustained increases in Irish house prices since 2013 warrant "ongoing assessment of potential overvaluation" and "emerging imbalances" in the residential property market.
It said the "significant degree" of overvaluation in the market was "materially lower" and "structurally different in nature" than the levels seen before the global financial crisis.
The ESRI said the pre-crisis period was "driven by excessive credit growth and loose lending standards" while the current situation appears to be "primarily an affordability issue".
It said: "House prices have risen faster than incomes, mortgage rates have increased, and not enough homes are being built to meet demand".
Paul Egan of the ESRI said: "Our analysis shows that Irish house prices are significantly above what economic fundamentals would suggest, driven by prices rising faster than incomes and higher mortgage rates, with middle-income households bearing the greatest burden."
By Cillian Sherlock, Press Association
source: PA
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