Demand for property should continue to outstrip supply, resulting in house price increases of around 15 per cent this year and 10 per cent next year, AIB has said.
In the first of a new series of quarterly economic reports, AIB Group Treasury says a number of fundamental factors including strong growth in employment, rising disposable incomes and relatively low interest rates should continue to underpin the housing market.
Despite the strong increase in house prices in recent years, the lower interest rate environment enjoyed by Irish borrowers as a result of Economic and Monetary Union means affordability, as measured by average mortgage repayments as a percentage of average household disposable income, has actually improved, AIB said.
However, it warned that such a measure may not be a true reflection of affordability given the growing gap between mortgage size and house prices, particularly for first-time buyers.
It notes that from a level of £20,000 at the beginning of 1990, the variance in the average house price and average loan value had risen to nearly £50,000 by the end of 1999.
Meanwhile, AIB-owned Goodbody Stockbrokers is positive about the outlook for the Irish stock market. It is forecasting that the ISEQ index will rise by 14 per cent this year to 6,300, boosted by earnings growth and low ratings.
