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Davy stockbrokers revise forecast for Irish house price inflation

Written by Robert McHugh, on 25th Oct 2016. Posted in Ireland

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Davy Stockbrokers have today raised their forecasts for Irish residential property price inflation. They now expect the Residential Property Price Index (RPPI) to increase by 7.0% in 2017, 6% in 2018 and 5% thereafter. 

This follows stronger-than-expected price movements in 2016, a tighter housing market and the new ‘Help-to-Buy’ scheme, which provides homes buyers with a 5% tax rebate. 
 
In 2015, there were 12,666 housing completions, 48,800 residential transactions and 13,400 mortgage loans to first-time buyers. Davy's say a conservative estimate is that 8% of first-time buyer loans were on new build properties. However, this does not include housing starts during the Celtic Tiger years now being completed. 

Department of Finance estimates suggest that the scheme could reach a minimum of 2,500 borrowers, or over 10% of the mortgage market. If the average tax rebate is €10,000, the costing implies that 5,000 borrowers could avail of the scheme.
 
According to Davy Stockbrokers, "Our current forecasts are for Irish mortgage lending for house purchase to equal €5bn in 2016, €6.2bn in 2017 and rising to €10.2bn by 2020. This is based on home building rising gradually towards the 25,000 estimated necessary to satiate natural demographic demand. Furthermore, the news that Ireland experienced net inward migration in 2016 suggests that underlying demand may be toward the top end of the range of estimates from 19,000-32,000." 

They added, "Also, as house prices rise, the numbers of households in negative equity will diminish – making them more likely to move home. The Help-to-Buy scheme and the stronger outlook for house prices therefore reinforce our view that mortgage lending will pick up." 
 
Source: www.businessworld.ie 

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