Shortage of homes ‘could force prices up 20% by 2020’

HOUSE prices are forecast to rise by 20% over three years – pushing the average price of a property to nearly €320,000 and the cost of one in Dublin to more than €500,000.

The Economic and Social Research Institute warned house prices could rise by a fifth by mid-2020 due to growing incomes, falling unemployment and the lack of supply of property.

And Angela Keegan, spokesman for MyHome.ie, said: ‘It’s clear the lack of supply and the economic recovery will continue to be the key drivers of house prices.

‘But so also will the mortgage market, as ever more desperate buyers seek larger loans in pursuit of the limited number of properties.

‘This is why we believe double-digit price inflation is likely to persist through 2018.’

The average price paid for a home was €266,000 in the year to September, according to Central Statistics Office figures released last week.

The ESRI’s research predicting that house prices could increase by 20% in the period Recovery: Angela Keegan spanning mid-2017 to mid2020 would mean the average value of a house could increase by €53,200 to hit €319,200.

In the capital, the average price paid for a house in the year to September was €419,983.

On the ESRI’s calculations, the value could increase by €83,996 to reach €503,979 by 2020.

Healy Hynes of the Real Estate Alliance group of estate agents said: ‘I would have no argument with the ESRI statistic.

‘There is a wide variety of house prices across the country but when you take the average house price it is still way below the construction costs of a home.

‘I would predict there will be substantial house price increases over the coming years until property prices reach the point that the construction of houses are viable again.

‘We will see a 20% increase at least in house prices to 2020, it could be even higher until we reach the price of a home that makes it viable for construction to start again.’

In its report, the ESRI stated: ‘Since 2013 prices have increased by 50% with recent house price inflation showing no signs of abating.

‘The performance of the housing market currently very much reflects developments in the real economy with Ireland’s strong recovery in macroeconomic terms post-2013 resulting in falling unemployment and growing income levels, all set against the backdrop of persistently low euro area interest rates.’

It continued: ‘Given Ireland’s expected strong economic performance over the next five years, the domestic market, in the absence of a significant supply response, looks set to experience consistently rising house prices over the medium term.’

ESRI professor Kieran McQuinn said: ‘As economic growth continues and the banking sector recovers, it will be critical to monitor credit provision to avoid fuelling house price inflation.’

Average prices nationwide rose 12.8% in the year to September, according to the CSO.

This compares to an 11.8% rise in the year to August and an increase of 8% in the 12 months to September 2016.

In Dublin, prices rose by 12.2% in the year to September. In the rest of the country prices were 13.2% higher in the year to September.

Of the administrative areas of Dublin, Dún LaoghaireRathdown had the highest median price at €510,000 whereas Fingal had the lowest median price (€305,000). Outside Dublin, the highest prices were in Wicklow, €295,000.

The lowest prices for a dwelling were in Longford, €76,000, and Roscommon, €85,000.

In the year to September, the most expensive Eircode area for buying a home was D04, or Dublin 4, with an average price of €732,284.

‘Buyers seek larger loans’