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Economists expect house prices to rise 60 per cent by 2005 Back  
Economists expect residential property prices to grow by 60 per cent in the period 2000-2004, the annual Finance property survey reveals. As a further report to the Government by Peter Bacon on supply and affordability of housing is expected, economists on the Finance panel expect prices to rise by 18 to 20 per cent this year, and 13 to 15 per cent in 2001.

Among the economists, the highest price increase anticipated in the period 2000-2004 is 91 per cent and the lowest is minus 3 per cent.

Despite house completions reaching a record level of 46,512 units in 1999, economists see demand being strong enough to move prices consistently higher in the medium term. According to Annette Hughes of DKM Economic Consultants, immigration will mean that 51,500 houses will be needed annually up to 2006, apart from housing for asylum seekers (see page 7).

The National Development Plan said 500,000 additional new dwellings would be needed over the next ten years to bring housing stock to 395-400 units per thousand population, up from 327 at present, but still lower than the European average of 450.

Any crash scenario is absent from the panel of economists’outlook. No economist foresees a sharp price reversal in any of the years up to 2005.

A review of past Finance surveys shows that the economists on the panel consistently forecasted the scale of the sharp property price rises seen in the past three years. While near-term forecasts were more likely to be on target, the tapering off effect did not happen as expected. The same tapering off is expected for the five years to the end of 2004.

The average probability among the panel of economists given to a bullish scenario is approximately 75 per cent, down only five per cent since last year, and indicative of a slightly greater uncertainty about the economic scenario ahead.

Only one economist, Alan McQuaid of Bloxham Stockbrokers, sees a net negative move in house prices over five years, and then only by minus 3 per cent. The largest annual house falls envisaged in a deliberately pessimistic scenario, with a less than one in four chance of occurring, are in the order of minus 10 per cent, and these would be foreseen in 2002 and 2004.

Meanwhile, the Annual Housing Statistics Bulletin for 1999 published in May by the Department of the Environment and Local Government showed lending growth reflecting housing volume and price increases. Total loan approvals amounted to ?6.1 billion, up 36 per cent on 1998, while loan payments amounted to ?5.1 billion, up 42 per cent. The number of loans approved was 78,572 - an increase of 14 per cent on 1998. The number of loans paid was 70,817 - an increase of 15 per cent on 1998.

The Department said ‘with the volume of planning permissions both granted and in the pipeline, the indications are that the significant increase in housing output in Dublin and nationally is set to continue.’

But according to Ken McDonald of Hooke & McDonald auctioneers, record house building in 1999 masked the fact that houses were not being built fast enough where demand was strongest (see article on page 11.)

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