According to the Economic and Social Research Institute (ESRI), “rising house prices may not continue into the future” and will moderate next year.
Home prices were overvalued by at least 7 percent last year but will cool in the future, the leading think tank predicts.
Rising interest rates and a fall in household savings are likely to moderate house price increases, ESRI said in its latest economic commentary.
House prices rose more than 14 percent year-on-year in June but slowed to 13 percent in July, according to the Central Statistics Office.
“That doesn’t necessarily mean house prices will fall by that amount,” said ESRI research professor Kieran McQuinn.
“But it does suggest that the kind of significant increases in house prices that we’ve witnessed really can’t continue into the future, and you’ll likely see a significant slowdown in house price growth in the coming quarters and beyond into the next year.” .”
ESRI forecasts a slowdown in Ireland’s economy over the next year – but expects jobs, spending and investment to continue on the back of strong growth in the pharma and technology sectors.
Modified domestic demand – a measure of growth that excludes the impact of aircraft leasing and patents – is expected to fall by more than half, from 7.5 percent this year to 2.5 percent next year.
Inflation is expected to reach 8.1 percent this year, falling only slightly to an average of 6.8 percent over the course of 2023 as high energy costs persist.
The central bank this week forecast that Ireland could enter a “technical recession” – defined as at least two consecutive quarters of negative growth – in 2023, although it said annual average growth will be positive.
Mr McQuinn said there was “definitely evidence of a slowdown in the economy” but said there was “enough momentum for the economy to continue growing strongly”.
Export growth will continue into next year, according to ESRI forecasts, although it will fall from 10.5 percent in 2022 to 6.2 percent in 2023.
Consumer spending is expected to remain positive, growing 3.2 percent this year and 2.5 percent in 2023, while total investment is expected to increase from 3.1 percent in 2022 to 7.4 percent next year.
High tax revenues mean next year’s budget will be in surplus again, Mr McQuinn said, leaving the government “some capacity for further initiatives if necessary” to stem rising energy prices.
ESRI Associate Research Professor Conor O’Toole said the upbeat outlook was because pharmaceutical and technology sectors “appear to be shielded” from global volatility.
But he said the growing importance of the two sectors to the economy – their contribution to Ireland’s growth has almost doubled in a decade, ESRI estimates – is leading to the state’s over-reliance on corporate tax revenues from a small number of large multinationals. which is supposed to “get even bigger”.
ESRI forecasts tax gains of between €675 million and €2 billion from a new minimum corporate tax rate of 15% agreed by the Organization for Economic Co-operation and Development (OECD) last year.
But losses could range from €2.4 billion to €5 billion if multinationals shift patents or withdraw investments as a result of the changes.
https://www.independent.ie/business/personal-finance/house-price-rises-cannot-continue-says-esri-as-it-predicts-slowdown-in-2023-42044146.html Home price increases “cannot continue,” says ESRI, predicting a slowdown in 2023