Almost 40 per cent of Irish housing transactions are now settled at a 10 per cent premium above the original asking price, reflecting what Bank of Ireland describes as “the intense competition for homes”.
In its latest quarterly bulletin, the bank revised up its forecast for house price inflation to almost 8 per cent this year and to 4 per cent next year.
“Our analysis shows competition for homes intensified during the summer with close to 40 per cent of transactions now being settled at a minimum 10 per cent premium over the original asking price,” it said.
The lender also noted that the average mortgage approval for house purchase was €318,300 in July, up 6.2 per cent pointing to further house price gains, “driven by rising wages and household incomes”.
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Bank of Ireland’s chief economist, Conall Mac Coille, warned that the current buoyant rates of employment and population growth were not sustainable in the longer term, “evident in pressures on housing, infrastructure and public services”.
“Ireland’s rates of pay growth (5.6 per cent) and house price inflation (9.6 per cent) are now starting to stand out from other euro area countries, posing a risk to competitiveness,” he said.
“House prices are now at their most expensive level relative to the euro area, since 2009,” he said.
“In this context, Budget 2025 should be finely balanced between delivering infrastructure in a timely and cost-effective fashion, whilst avoiding measures that risk overheating the economy,” he said.
In its report, Bank of Ireland revised down its forecast for Irish GDP (gross domestic product) growth this year, predicting it would contract by 1 per cent due to statistical distortions and volatile data.
However, it forecast the domestic economy as measured by modified domestic demand would grow by 2.3 per cent.
Ireland’s economy has expanded rapidly again in 2024, evident in the upgrade to the bank’s forecast for employment growth to 2.4 per cent, it said.
It also noted that domestic growth this year was being helped by a 3 per cent jump in consumer spending as pay growth exceeds inflation.
Bank of Ireland said the Government’s proposed €8 billion Budget 2025 package, involving 6.9 per cent public spending growth, would support domestic demand next year.
“Beneath the statistical fog, the export sector is performing well and should contribute positively to 3.5 per cent GDP growth in 2025,” it said.
Bank of Ireland’s latest economic outlook comes in the wake of a similar commentary from the Central Bank last week, which said the economy “continues to grow at a strong pace supported by the buoyancy of domestic economic activity” while warning that further fiscal stimulus in the budget would result in the economy growing faster than projected in the short term.
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