(Bloomberg) -- Irish house prices are about 7% overvalued, and gains are likely to moderate “substantially” in the short-to-medium term, according the the Economic and Social Research Institute.
Institutional investors and local authorities have driven up prices by buying properties, the ESRI said in its quarterly report. Households also stepped up their savings rate during the pandemic, helping them afford to pay more.
“Going forward, that the recent surge in savings and wealth is not sustainable,” and the pace of price growth is likely to return to moving with household income, authors led by Keiran McQuinn wrote.
Irish house prices have climbed to their highest level since their 2007 peak, before the financial crisis. The report said excess credit probably isn’t contributing much to this rally, marking a difference from the years leading up to the last boom.
Rising interest rates and declining real incomes due to inflation will probably deliver a “contractionary impact” on house prices, the report said. It also noted that the lack of supply of new properties probably will support the market.
Further reading: Irish Central Bank Raises 2023 Inflation Forecast to 6.3%
(Updates headline. A previous version of the story was corrected due to a misspelling in the headline.)
©2022 Bloomberg L.P.