Irish Property Bubble

In the words of the newspaper namely The Economist, a large bubble that is about to pop in Ireland exists. Recurrent warnings about the Irish property bubble / boom / catastrophe have long made people cynical about the whole issue. But the caution signs have been coming way too fast over the last couple of months and the Q3 results from Daft are in, 5% approximate drops in the south and north Dublin County and more plummets in the city itself. With lending institutions being told to control credit by the Central Bank, another interest hike from the ECB on the way, there might be a flood of investors on the lookout for comprehending value before the soft landing turns into a crash.

An IMF report in 2000 challenged that Irish property prices were improbable to carry on to grow strongly for long, since it would go against all evidence collected in other countries that had seen quick price approval. House prices went on to triple between 2000 and 2006. However, demand for residential property has fallen since the beginning of 2007, and this has resulted in price reduction for March 2007 of 0.6% and for April 2007 of 0.8%. This has led to an anticipation of drop in house prices on a quarterly basis for the first time since 1994. Houses in the commuter belt in the region of Dublin fell previously, due to an amalgamation of increased supply within the Dublin Urban area, increasing interest rates and continuing infrastructural issues in rural communities, Prices in large urban areas are static, though demand has dropped noticeably.

The increasing cost of property and the willingness to borrow money to acquire Irish property has resulted in substantial increases in the total level of private sector debt, due to property investment in the Irish economy. This has become of increasing concern to the Irish Central Bank, which has issued many warnings, in an effort to affect consumer behaviour.