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No house price slowdown as growth of 25p.c. is forecast over five years Back  
The long awaited, much feared, slowdown in Irish residential property prices is still some time away, according to a panel of Ireland’s leading financial services economists, who predict that prices will grow by 25 per cent over the next five years in this, the eighth annual FINANCE property survey.
AAgainst a backdrop of continued concern over the health of the Irish residential property, with record prices still being achieved, respondents to this year’s FINANCE property survey say that there is no sign of the property ‘bubble’ bursting, and they predict growth of 4.6 per cent on average, per annum, over the next five years.

Despite warnings from the Central Bank and The Economist, amongst others, that the Irish market will crash, the panel (which includes stockbrokers), say that growth will be in the region of 9 per cent in 2004, followed by years of more moderate growth of around 4 per cent per annum.

This year’s survey is marked by increased optimism from the participants, as last year the economists predicted growth of 17.2 per cent over the five years.

Niall O’Grady, general manager, marketing with permanent tsb is the most bullish respondent, and he predicts average growth of 7.8 per cent p.a. over the next five years.

His forecasts are based on the rental market remaining strong and that the stockmarket continues to stutter towards a slow recovery, leaving the property sector as a more attractive investment, than low deposit rates, or unpredictable stock market growth.

Austin Hughes, chief economist with IIB Bank, was last year’s most bullish economist, and is second this year, with average growth of 7.3 p.a. predicted for the next five years.

This year’s ‘bear’ is Alan McQuaid, chief economist with Bloxham Stockbrokers, who predicts per annum growth of just 1.7 per cent over the next five years, with growth of 5.6 per cent in 2004, falling to -.0.2 in 2007. He says that, ‘Although supply/demand equilibrium should be reached over the next eighteen months or so, the low interest-rate environment and the strong labour market should ensure that demand for housing remains robust and that prices stabilise rather than collapse going forward, so in overall terms I continue to look for steady growth in house prices over the next few years, albeit in single digit terms’.

Dan McLaughlin, chief economist with Bank of Ireland, and a self-professed ‘bull’ on the Irish market, sticks with his opinion of last year that, ‘The market is probably approaching equilibrium levels after a decade of excess demand, which will result in annual price gains in line with the general rise in consumer prices’.

The above figures are based on a composite of predictions the panel gave for house price growth under bullish and bearish scenarios.

As was the case last year, retail is set to out-perform both industrial and commercial property over the next five years, rising by 18 per cent, compared to 11.8 per cent and 10.8 per cent for industrial and commercial respectively. However, within these predictions, there is a great divergence of opinion from the respondents. Marie Hunt, director of research at CB Richard Ellis Gunne predicts retail will grow by 35 per cent by 2008, as demand continues to outstrip supply. McQuaid on the other hand, predicts growth of just 5 per cent, or one per cent on average per year in the retail sector.

The participants in the survey are: Austin Hughes, chief economist, IIB Bank, Marie Hunt, director of research, CB Richard Ellis Gunne, Dan McLaughlin, chief economist, Bank of Ireland, Eunan King, senior economist, NCB Stockbrokers, Alan McQuaid, chief economist, Bloxham Stockbrokers, Niall O’Grady, general manager, marketing, permanent tsb, Jenny Pollock, senior economist, AIB Global Treasury, and Jim Power, chief economist, Friends First.

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