Irish house prices: Déjà vu all over again? Quarterly Economic Commentary Special Article, WINTER 2017

The pace at which Irish house prices have grown since 2013 has surprised many observers. The Irish housing market was one of the most affected across the OECD after the international financial downturn of 2007/2008, with prices falling by 54 per cent in nominal values between 2007 and 2013. However since 2013 prices have increased by 50 per cent with recent house price inflation showing no signs of abating. The performance of the housing market currently very much reflects developments in the real economy with Ireland’s strong recovery in macroeconomic terms post-2013 resulting in falling unemployment and growing income levels, all set against the backdrop of persistently low Euro Area interest rates. In this paper, using a variety of approaches, recent developments in house prices are appraised; in particular, the sustainability or otherwise of current prices is evaluated and cross-country comparisons are also drawn. The unifying conclusion which emerges is that, given Ireland’s expected strong economic performance over the next five years, the domestic market, in the absence of a significant supply response, looks set to experience consistently rising house prices over the medium term