House prices will continue to rise above Celtic Tiger levels in the coming months, the banks claim

According to the banks, house prices will continue to rise above the Celtic Tiger level in the coming months despite the cost of living crisis and fears of a global economic slowdown.

Strong demand, particularly from first-time buyers, will keep prices rising, according to a new report from the Banking and Payments Federation Ireland.

It appears that homebuyers will continue to scramble to save for real estate even as mortgage costs continue to rise.

The banking lobby group said a steady supply of housing is needed to mitigate house price increases and improve affordability.

Many fear we are headed for a recession due to gas shortages while the European Central Bank is poised to hike rates by up to 0.75pp this week.

But CSO figures show that house prices have already skyrocketed 14.1 percent in the year to June.

This means prices are now at levels similar to those seen at the height of the Celtic Tiger property bubble in 2007.

But BPFI chief executive Brian Hayes said: “With house prices rising 14.1 per cent on the year to June 2022 nationally, the house price index is now at levels similar to its peak in April 2007, with average prices expected to increase further in the coming months.”

The Banking Authority’s latest Housing Monitor finds that the main reason for current house price increases is the lack of supply of new housing in contrast to credit growth.

Credit growth was the reason for the price turbo in the mid-2000s.

Employment hit a record high of nearly 2.6 million this year, and weekly earnings are 21 percent higher than five years ago

He said central bank figures show that 45 percent of mortgages currently issued meet credit limits, which limit borrowers to three and a half times their salary.

He said the number of exceptions to lending rules fell from 21 percent in 2016 to 14 percent last year.

“Economic fundamentals in the economy such as employment and median income are the key factors supporting solid demand for mortgages at this time,” Hayes said.

Employment reached a record level this year at nearly 2.6 million. And weekly earnings are 21 percent higher than five years ago.

“The increase we are seeing in the average home price is also reflected in the average mortgage rate.”

Mr Hayes said the level of mortgage outstandings had increased compared to the first half of 2019. Supply has increased significantly, but it needs to continue to moderate house price increases and improve affordability.

“And while the construction sector has faced significant challenges in recent years due to the impact of the pandemic, labor shortages and inflationary pressures, supply in the housing sector has improved significantly throughout 2022.”

He said the latest figures show the level of housing production in the second quarter of this year is 46 percent higher than total completions in the same period in 2019 before the pandemic.

“If the sector continues to expand at a similar pace to that seen in the second half of 2021, the expected increase in supply levels over the next two years should help meet the demand we are seeing given strong employment levels and increases in income The Irish Banking sector is able to provide more sustainable mortgage lending,” My Hayes said.

Some experts argue that rising interest rates and an economic slowdown will weigh on consumer sentiment for homebuyers in the coming months. House prices will continue to rise above Celtic Tiger levels in the coming months, the banks claim

Fry Electronics Team

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