Irish house prices are expected to grow much more slowly in 2005 than over the past few years as house-buying hunger begins to abate, economists predict.
According to a Reuters survey of 10 Dublin-based economists, published today, house prices will rise by 11.5 per cent on average in 2004 but growth will halve to just 5.5 percent next year.
In 2003 and 2002, house prices grew by 13.7 per cent and 13.3 per cent respectively, according to the permanent tsb/ESRI House Price Index.
"We wouldn't expect a significant appreciation next year given that rents are still falling and given that we're in a position where supply has at least caught up with demand," said Rossa White, economist at Davy stockbrokers.
He said sentiment was likely to be the driver behind lower growth rather than any specific trigger -- such as a rise in interest rates.
"I wouldn't be surprised if we had a few years when we had 2-3 per cent growth," White said.
The Central Bank warned earlier this year that a sudden end to the country's property boom posed one of the most serious risks to the country's buoyant economy and jobs market.
But economists do not expect a sharp drop given predictions of strong economic growth in Ireland over the next few years.
Economists raised slightly their estimates for 2004 gross domestic product (GDP) growth. The poll put the mid-range forecast for GDP growth at 5.4 per cent. November's survey foresaw growth of 5.25 per cent.
In 2005, GDP growth is seen at 5.0 per cent, rising to 5.5 per cent in 2006, the latest poll showed -- unchanged from the previous forecast.
The outlook for inflation has improved. Growth in the consumer price index (CPI) is expected to average 2.5 per cent in 2005, down from last month's estimate of 2.7 per cent.
"One of the more notable features of Irish economic data in the coming months will be decelerating inflation," said Oliver Mangan, chief bond economist at AIB Global Treasury.
"The recent fall of oil prices, absence of indirect tax hikes in the budget, levelling out of house prices and strength of the euro should see the CPI rate fall to 2 per cent by spring," he added.