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Residential to out-perform other sectors over next five years Back  
The Irish residential market is forecast to beat performance in the retail, commercial and industrial property sectors over the next five years to 2008, economists responding to the eighth annual FINANCE property survey predict.
WWWWWith predicted growth of 25 per cent, residential property is set to beat the retail (predicted growth of 18 per cent), industrial (predicted growth of 11.8 per cent) and commercial (predicted growth of 10.8 per cent) sectors over the next five years.

The economists predict that 2004 will see the greatest increase in prices, with growth forecast of around 8.6 per cent, followed by 4.1 per cent in 2005, 3.3 per cent in 2006, 3.8 per cent in 2007 and 4.6 per cent in 2008.

Jim Power, chief economist with Friends First, says that during the period under review, the market is likely to be ‘characterised by strong demand for owner occupied and holiday homes, and a weakening in demand for buy to let, reflecting excess capacity and consequent rental compression’.

The main risk to the Irish housing market would appear to be from over-supply, Jenny Pollock, senior economist with AIB writes. ‘The current level of completions at some 65,000 to 70,000 per annum is outstripping estimated demand and cannot be sustained indefinitely. If the construction industry fails to respond to lower long-term demand, and doesn’t scale back output levels accordingly, then the Irish housing market would come under threat,’ she says.

As in previous years, the economists were asked to give their predictions for the outlook of the residential property market given bullish (the market reaching its maximum plausible potential growth) and bearish (the market reaching its plausible lowest (or negative) growth circumstances) scenarios. As the table below shows, the average weighting for a ‘bullish’ scenario is 73 per cent (up from 68.9 in 2003) and for a ‘bearish’ its 27 per cent (up from 31.1 in 2003). These predictions were used to give the composite figures outlined in the chart below.

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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