Feb 19, 2006

Irish House Prices Keep On Rising

A major international think-tank is preparing to deliver a glowing report on the Irish economy, in which it will say there is no threat of a housing market crash over the next two years.

The Organisation for Economic Cooperation and Development (OECD) will say in its report, to be published in the next two weeks, that the economy will continue to grow rapidly.

The report is one of the most positive reports on the economy ever delivered by the Paris think-tank. It is prepared every two years and its forecasts up to the end of next year will come as a boost to the Fianna Fail-led government, as it prepares for an election next year.

The report will predict that house price growth will continue and that the housing market is not a bubble waiting to burst. Significantly, it will suggest that house price inflation could grow by up to 8 per cent in each of the next two years, without raising the risk that prices will collapse.

The economy will grow by 5 per cent this year and next, and is expected to continue to draw on immigrant workers to fuel a surge in Irish incomes.

The OECD will state its view that house prices, which have grown quickly along with other eurozone countries such as Spain, France and Italy in recent years, can be justified by the fundamental strength of the local economy.

Factors such as low interest rates and the growing population in Ireland have supported the huge rise in house prices in the past.

If the OECD forecasts are realised, the average cost of a Dublin house would climb to €430,000 by the end of next year. The OECD predicts that house price growth will slow, but it has ruled out the risk of a sudden collapse in the market.

Despite the rise in oil prices, the report will predict little risk of consumer price inflation sparking as it did during the height of the boom in 2000. Inflationary pressures are not building up, despite oil price rises and high growth rates, the report will say.

The OECD will also say that the Special Savings Investment Accounts (SSIA) pose only an outside risk for stoking inflation if consumers spend more of the €16 billion SSIA windfall than is expected after they start to mature in May

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