New house prices are unlikely to change this year, while the price of second-hand houses is set to rise by 8%, according to Bank of Ireland economist Dr Dan McLaughlin.
Writing in the bank's Irish Property Review, he says the market is close to equilibrium because of a sustained increase in supply. But he adds that the unfilled demand which has grown up from the mid-1990s should be strong enough to support prices.
Dr McLaughlin also points to a 'quality of life' factor which is supporting second-hand prices. He believes there are indications that buyers are willing to pay a premium for a location with good transport links and proximity to the city centre, as many new houses are being built on the periphery with inadequate transport links.
The review forecasts that 62,000 houses will be built this year, with the average price of a home at €207,000 nationally and €267,000 in Dublin.
It adds that demand is being underpinned by the robustness of the Irish labour market and low interest rates.
The report describes 2002 as an 'astonishing year' for mortgage lending and predicts that this will rise again by 11% in 2003.
Olive Moran of the bank's mortgage division rejects concerns about the level of borrowing by individuals and households, saying that the average combined income of borrowers was around €58,000 last year, with the average house price at €186,000. This implies a 3.2 multiple of income, which she says is not excessive.
The review says the worst is over for the commercial property market, with positive returns in all sectors in the first quarter of this year.
