The rate of house-price inflation is set to halve this year, bringing to an end almost a decade of double-digit growth, a leading economist said yesterday.
Dr Dan McLaughlin, chief economist, Bank of Ireland, said yesterday that house prices rose by 14 per cent last year. This brought the average cost of a house in the State to €275,000, double what it was in 1998.
However, Dr McLaughlin predicted yesterday that the rate of increase would slow rapidly this year to 6 per cent.
He based his forecast partly on the fact that 65,000 new houses would become available in 2004.
That increase would take the average price of a house in the country as a whole to €291,000 and in Dublin to €385,000. The bank's quarterly analysis said the housing boom showed no signs of abating.
But Bank of Ireland Mortgages managing director, Mr Joe Larkin, said the increases that characterised the market during much of the last 10 years were unlikely to recur.
"The days of double-digit growth are over," he said yesterday. "That could not be sustained."
House price inflation broke the 10 per cent mark in seven years out of the last decade, and peaked at more than 30 per cent in 1998.
Mr Larkin added that the market would continue to grow strongly, underpinned by high employment and low interest rates.
He predicted that the European Central Bank would be unlikely to increase rates before the final quarter of the year.
He said one of the few variables in the current environment was the euro-dollar relationship. The US currency is expected to begin recovering around mid-year, he said.
Mr Larkin said that if it were to continuing sliding against the euro, this would change what the bank believes could be the scenario for the rest of the year.
The bank's quarterly analysis states that gross mortgage lending came to €13.3 billion in 2003. Outstanding mortgage debt came to €59 billion, an increase of 25.7 per cent.
Dr McLaughlin said that both rising prices and the fast pace of new house completions, which he put at 67,000 for last year, drove this increase.
