Irish consumers' remarkable appetite for property is likely to continue in 2005 as the benign interest rate outlook encourages more buyers into the market, according to a top economist.
Mr Austin Hughes, chief economist with IIB Bank, said euro zone interest rates are likley to rise only modestly in 2005 while the Irish economy outpaces growth rates in the rest of the euro area.
The unprecedented level of house completions in Ireland should result in the property market reaching what Mr Hughes calls an "active" balance in 2005.
"By this, we mean demand and supply should move into line, with both remaining at very strong levels in 2005," he said.
On balance, this should lead to some easing in house price inflation and by the end of 2005 house prices are expected to have risen by 7 per cent.
A survey conducted by IIB and the ESRI found that one in nine adults is considering buying a property and roughly half of these expect to purchase in the next two years.
Mr Hughes describes these numbers as "remarkable" in light of the surge in activity in the property market in the past decade.
Mr Hughes said these estimates suggest that in the near term, new housing demand could remain within a 70,000 to 80,000 range. "We expect a future moderation but the underlying demand position may be stronger than previous studies envisaged," Mr Hughes concludes.
Drawing together the change in house prices, an increase in the housing stock and higher borrowing levels, IIB estimates that Irish housing-related wealth increased by about 15 per cent last year. This corresponds to an increase in money terms of around €30 billion - which is more than four times the rise in money GNP last year.
A similar experience in the United States has provided critical support to household spending through a "wealth effect" where homeowners unlock the equity in their houses to finance other spending.