Residential property prices are unlikely to rise ahead of inflation this year, Bank of Ireland's chief economist Dr Dan McLaughlin has predicted. He sees real house prices rising by about 4 per cent in nominal terms, in line with inflation.
"The Government decision to abolish penal fiscal measures on investors coupled with firm personal income growth, will be balanced by a slowing in employment growth," said Dr McLaughlin. He argues that in the past year there has been a broad equilibrium restored to the housing market following a prolonged period in which demand outstripped supply. The average house price in 2001 was €207,000 (£163,206), a rise of a little under 9 per cent on the previous year.
On mortgage interest rates, Dr McLaughlin believes house buyers have an unusually attractive opportunity to fix rates for three years at under 5 per cent.
"People tend to fix at the top of the cycle when the only opportune time to fix is just before the turn at the bottom," Dr McLaughlin said. He argued this point was reached one month to six weeks ago but said there was still reasonable value to be had.
Dr McLaughlin was speaking at the launch of a new quarterly report, Irish Property Review, produced by Bank of Ireland Treasury & International and Bank of Ireland Group Mortgages.
In its analysis of property prices, Bank of Ireland predicts that gains in house prices are likely to be biased towards the second half of the year, due to the rise in consumer confidence at that time.
