The supply of new houses should catch up with demand next year, according to the Economic and Social Research Institute, leading in turn to builders reducing the number of houses being built. This should lead to house prices levelling off, according to ESRI economist Mr Terry Baker, although he does not expect a British-style price collapse.
Forecasting an end to the housing shortage next year, the institute said that about 47,000 dwellings would be completed this year, followed by 50,000 next year.
"On the basis of any analysis of housing demand, and even allowing for the bringing forward of purchases in expectation of future price increases, such a number of completions would seem likely to prove excessive. At some time in the course of the year an easing of pressure on the supply of dwellings can be expected, with a subsequent check in the rate of increase in new house building".
This is most likely to take place late next year, according to the ESRI, meaning that the overall number of houses built next year will still be greater than the 1999 total.
A Government-sponsored report earlier this week also predicted strong growth in building, but also raised warnings about inflationary pressures in costs and skill shortages in the industry,
The interest rate trend also affects those owning or buying homes. International interest rates are expected to rise gradually in the remainder of this year and in 2000, but they will remain low by historical standards, the ESRI forecasts.
On balance, the institute predicts that euro rates will increase by more than British rates, estimating an increase of 0.75 of a percentage point in short-term euro rates between late 1999 and the end of next year.
"Once euro zone interest rates begin to rise, an acceleration in euro appreciation can be expected, against both the dollar and sterling," its report states.
According to the ESRI, Irish economic growth will be underpinned by a better outlook for the world economy, with most Asian economies recovering, low interest rates in economies such as Germany, France and Italy and strong continued growth in the US.
