DUBLIN: Ireland is mounting a spirited fightback from economic collapse but as recovery takes hold, a housing shortage has sparked talk of another dangerous property bubble.
Residential property prices in Dublin surged 24.7 percent in August compared with a year earlier, according to official data. Nationally, prices rose by 14.9 percent in the year to August.
The sharp jump in prices reminds many of the decade to 2006 when cheap credit and reckless lending fuelled a property bubble that saw Irish house prices rocket by about 300 percent.
“The Irish property bubble is back with house price increases in double-digit gains,” VTB Capital economist Neil MacKinnon said.
Earlier this month, images of people queuing for days to secure a house in a new development in north Dublin triggered a media frenzy that a property bubble was underway.
Approximately 35,000 residences changed hands in the year to July 2014, nearly double the figure for 2011. Meanwhile, new mortgage lending was valued at almost €1.4bn by mid-year, 63 percent up on the same period last year.
When the bubble popped in 2008, house prices plummeted by 50 percent, unemployment soared and the taxpayer eventually bailed-out the banking sector to the tune of €64bn.
On the verge of running out of money, Ireland turned to the EU and IMF for emergency funding in 2010. The following year, just 18,000 residential transactions took place.
Now almost a year since exiting the bailout programme, with growth levels not seen since the mid-2000s, more people in work and banks starting to lend, house prices are surging again.
“It was cheap money, greedy banks, excess leverage, a sharp increase in mortgage debt followed by an inevitable bursting of the bubble that brought about the last financial crisis and in the process shattered the Irish economy,” said MacKinnon.
“We don’t seem to have learnt any lessons from the crisis and appear condemned to repeat the same mistakes.”
However, other experts argue that the price rises point to a lack of supply and years of pent-up demand, rather than a credit-fuelled bubble that defined the “Celtic Tiger” years a decade ago.
Kieran McQuinn from the Dublin-based Economic and Social Research Institute (ESRI) believes prices, which fell 50 percent in the five years from 2007, had dropped too much.
“The market had over-corrected and property was probably somewhat undervalued. Positive signs in the economy right now coupled with high demand is driving pricing up at present.”
The surge in demand means property prices are now 41 percent lower across Ireland than their peak in September 2007.
According to the latest survey by property website Daft.ie, the average asking price for a residential property nationwide is €187,000, compared to €171,000 a year ago and €380,000 at the peak of the market. One of those home-hunters is Karen Creed, who moved back to Ireland to start a family after working as a journalist in Paris. AFP
