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Economist Ronan Lyons
bubble trouble

We asked this expert if people were paying over the odds for property again

The demand for houses is there – but are people spending more than they should?

AFTER FALLING BACK slightly at the start of the year, house prices across Ireland are soon expected to start going up again.

Recently, economists cautioned that 18 months of price rises meant Dublin property no longer looked cheap by international standards – although that didn’t necessarily mean it was now over-valued.

That came as the latest figures from the Central Statistics Office showed prices fell on average in both January and February after a national increase of nearly 15% for the last 12 months.

However, the latest housing report showed asking prices rising again and that is expected to lead to higher costs in coming months.

Meanwhile, last week there was also a warning from Jones Lang LaSalle Ireland managing director John Moran that the commercial property sector could already be headed for another bubble.

Ghost Housing Estates A Celtic Tiger ghost estate in Co Laois Eamonn Farrell / Photocall Ireland Eamonn Farrell / Photocall Ireland / Photocall Ireland

Paying too much?

With all that in mind, asked economist Ronan Lyons, the author of the report, whether Irish property buyers were being asked to pay over the odds again for houses – particularly in the capital.

And the answer was – probably not, but it’s complicated. Lyons said it was difficult to determine an “equilibrium price” for property, although based on people’s current wages alone house prices in Dublin shouldn’t rise much further.

“The issue at the moment in Ireland is that there are still a lot of people looking to buy,” he said.

Dublin has a rapidly-growing population – most cities would love to have that problem – but the problem arises when you don’t have housing being built.

“We do focus on house prices relative to incomes, but really the thing you want to focus on is the cost of building a home relative to people’s incomes.”

Lyons said the high cost of building new, affordable housing like apartments in Ireland had a flow-on effect to both purchase prices and rents – which made it harder again for lower-income families to afford their own homes.

Here’s his full explanation:

Video / YouTube

Video by Michelle Hennessy

Note: Journal Media Ltd has shareholders in common with publisher Distilled Media Group.

READ: These are the cheapest places in Ireland to buy a family home >

READ: Things are finally looking better for jobs AND wages >

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