Capital’s houses 25% overpriced
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HOUSES in Dublin are overvalued by 25%, it has been revealed.
The Economist found prices in the capital have shot up by 92.7% since 2012 while there has been a 79.6% rise nationally.
It also showed property growth in Dublin has outpaced 22 other cities in the past five years.
The new house price index published by the influential newspaper covered some of the world’s “most vibrant” locations including San Francisco, Sydney and London.
The average price of a home in these cities increased by 34% in real terms over the past five years while seven saw it rise by more than half. In 2003, the Economist predicted house prices in Ireland would plummet by 20%.
However, in the new report it is comparing them with the average household income in a bid to analyse whether the market is driven by “fundamentals or froth” .
The publication found prices in Dublin are 25% over-valued.
This is considerably less than its estimates for other cities including Hong Kong (+94%), Paris (+70%), Vancouver (+65%) and London (+50%) but higher than Zurich and Madrid (+15%). Singapore, Milan, Tokyo and New York were the only four cities in the survey that had prices at or under fair value.
The Economist said: “As demand weakens, supply strengthens and mortgage rates rise, the bull run in global cities’ housing may be drawing to an end.”
It also points to the possibility of falling demand as the growth in globalised cities’ populations will soon start to slow.
And it claimed supply is finally ticking upwards, even if it still isn’t sufficient.
Finally, the newspaper cites an end to cheap mortgages, and bonds becoming attractive again as interest rates advance.