PRICE DROP Irish house prices could start to fall over next two to three years – but we must be prepared for economy overheating, Central Bank Governor warns
11 May 2018
The regulator told politicians at the Oireachtas Finance Committee there is now a 'material risk' that home valuations will go into reverse by 2020 or 2021
10th May 2018, 1:50 pm
Publication: Irish Sun
Author: Kieran Dineen, Public Affairs Correspondent
HOUSE prices are likely to begin to fall in price over the next two to three years, according to the Governor of the Central Bank.
Philip Lane also believes we need to be prepared for the economy overheating – which could hamper Leo Varadkar’s plans to reduce income taxes further.
At the Oireachtas Finance Committee, the regulator told politicians there is now a “material risk” that home valuations will go into reverse by 2020 or 2021.
|Central Bank Governor Philip Lane|
And he said anyone thinking of buying a property now needs to bear this in mind.
Mr Lane said this was due to a buildup of housing coming on stream along with other global factors.
Senator Kieran O’Donnell asked him about the “escalation in the price of houses for starter homes” which are now “outside the gambit of the ordinary person”.
Mr Lane said he fully recognised the “affordability crisis in the housing market” and insisted: “The only answer is to further increase the supply of housing.”
|Mr Lane said there is now a ‘material risk’ that home valuations will go into reverse by 2020 or 2021|
He had earlier pointed out the projections of 23,500 new units in 2018 and 28,500 in 2019 are “below current estimated housing demand of 30,000-35,000 per annum outlined in Project Ireland 2040”.
But the Governor later revealed: “I do think there is a material risk of a reverse of house prices… as supply builds up that will put downward pressure on houses in coming years.
“This is why we have our mortgage rules, in order to stop excessive debt coming on at the wrong time. Only those financially prepared can take on a mortgage at the moment.”
He believes the deposit and income rules for taking out mortgages are “beginning to bite more severely” which will help slow down the house market.
|Lane said anyone planning to take out a mortgage now and upgrading |
in a few years should ‘recognise that risk’
Pressed on a possible decline in house prices, Mr Lane told the committee: “If you are planning on taking out a mortgage now, and trading up in two or three years time, you need to recognise that risk.
“If you are planning to live in that house for a substantial period of time then that should not be a matter of overriding concern.
“The system is a lot more resilient now but I am troubled by the temptation that it is one direction only. Over time there will be a natural increase… it is not a one way bet.”