Irish house price growth only set to continue

Irish house price growth is only set to continue, warns Savills, despite measures taken by the Central bank.

The Central Bank's recently announced mortgage rules, designed to soften price growth, will do no such thing, predicts Savills. The advisor forecasts that the measures will only increase house price growth, instead causing a change in the mix of buyers.

"By diverting demand into the rented sector the new rules will lead to stronger rental growth. In time this will attract investors who will compete with everybody else to buy properties," comments John McCartney, Economist and Director of Research at Savills. "Therefore the new measures will do nothing to soften house price growth by curtailing demand.  They will simply increase the ratio of investors to first time buyers."

Savills expects that house prices will continue to rise in 2015 due to an overall shortage of supply relative to demand. However, because compounding price growth over the last two years has raised baseline prices, the percentage rate of growth will be more moderate than before. 

This, and falling deposit yields due to QE, will attract investors despite the expiry of Capital Gains Tax Incentives last December, he adds:

"By increasing the down payment that is needed to qualify for a mortgage, the Central Bank rules will inevitably lead to first time buyers spending longer in rented accommodation. This guarantees a stable platform of demand which will undoubtedly encourage landlords to invest. At the same time, investors will be driven into property by low returns on cash deposits, and these are being further depressed by quantitative easing."