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Return of Celtic Tiger house prices a real threat, leading property experts warn

Warning comes as Varadkar concedes home ownership is ‘out of reach for too many’ and planners ‘down tools’ as court blocks projects

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House prices could return to levels not seen since the Celtic Tiger era, experts have warned. Stock image

House prices could return to levels not seen since the Celtic Tiger era, experts have warned. Stock image

House prices could return to levels not seen since the Celtic Tiger era, experts have warned. Stock image

House prices could reach “Celtic Tiger levels”, two leading property experts have warned, as Tánaiste Leo Varadkar last night promised more building and admitted home ownership is “out of reach for far too many”.

As the Government set a fresh target of up to 40,000 new homes a year in order to reach 70pc home ownership by the end of the decade, economist Jim Power said the housing market was “currently on fire”, with prices around 14pc below Celtic Tiger peak.

Housing lecturer Lorcan Sirr and mortgage expert Karl Deeter both said prices now threatened to return to levels not seen since 2006, with Mr Deeter suggesting: “This will end in tears.”

All three experts blamed government housing policy, with Mr Power adding: “The housing market is a litany of failure and the Government is not getting to grips with it.”

The Sunday Independent can reveal that planners in Dublin have downed tools because permissions for so many new homes have been overturned by the High Court.

The planners’ decision has thrown the Government’s fast-track planning system for thousands of houses into crisis.

CSO data published last week showed a dramatic surge in house prices throughout the pandemic, particularly after lockdowns were lifted. There was a 4.5pc increase in April alone.

The Central Bank warned last week that there will be “significant house price growth” in the near to medium-term.

Now there is growing concern among experts that the housing market will worsen before the prospect of buying a home becomes more affordable for many people, particularly younger generations.

The warnings come as the Sunday Independent exposes the fast-track planning system for housing as being in crisis, with “an immediate and lengthy timing risk” to plans for more than 60,000 housing units — a massive blow to the hopes of prospective first-time buyers.

Several planning and construction sources confirmed that because permission for so many new homes has been overturned by the High Court, planners have downed tools and strategic housing developments have come to a halt.

Plans for thousands of homes have been “put on ice” because of the growing logjam, according to sources.

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The setback comes as government policy is under renewed fire from experts who believe house prices will continue to rise for between two and four years.

Following publication of the latest CSO data, which shows April’s price increase of 4.5pc compares with 3.5pc in March and an increase of 0.7pc in the 12 months to April last year, Mr Varadkar defended government policy, saying house prices were “substantially lower” than at the height of the Celtic Tiger 14 years ago.

Yesterday, however, property experts said such was the demand — and due to the failure of policy and other external issues — that prices could soon return to those levels.

Predicting they could continue to rise for the next four years, Mr Sirr, senior lecturer in housing at Technological University Dublin, said that “yes, potentially” there could be a return to Celtic Tiger levels.

This, he added, “would rightly be seen as an indictment of poor government policy”.

“Price rises will be fuelled or at least maintained by government schemes to assist ownership, such as Shared Equity and Help to Buy,” he said.

“Most people don’t realise that out of the 20,000 houses we’ve built each year recently, after one-off houses, after the state buy up houses for social housing and the institutional funds buy up thousands of new housing units, only about 7,000 to 8,000 come to the market every year.

“In 2020, councils bought twice as many new houses as they built. If the State built more social housing themselves and funds were diverted from residential to commercial investment, there would be a lot more houses available for people to buy.”

Mr Deeter said that while prices were still “well below Celtic Tiger peaks”, there were “enough problems in the system that could actually push prices to the same point again”.

He also said “boom and bust” was “baked into the system”, and that while the current rapid price increases would continue for a “few years”, there will be a bust.

“This will end in tears,” he said. “Trees don’t grow to the sky — they will fall down.”

The experts warned that the upward pressures on house prices include higher costs of land, labour, material and fees, plus higher demand, lower supply and higher investor participation.

However, the Government hopes its policies will drive down these pressures.

There is an expectation that renewed inflation will increase borrowing costs and drive down demand.

There is also a view that urban flight will drive down demand in Dublin and in the east of the country but increase it elsewhere.

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