Housing in Ireland ‘not overvalued’ within EU

• Published date: 23 November 2022
• Publication title: Irish Times (Dublin, Ireland)

Housing in Ireland is "not overvalued" as high prices are driven by an undersupply of homes, the European Commission has said, in contrast to other EU countries at risk of a painful correction as rising interest rates collide with inflated prices

Analysis by commission officials released yesterday warned of economic risks from potential housing price corrections in the EU, finding that houses were more than 10 per cent overvalued in over half of EU member states, and more than 20 per cent overvalued in nine countries.

Ireland is not among these however, according to the commission's Alert Mechanism Report. The metrics it used to evaluate Ireland's housing market "do not show signs of potential overvaluation", the report read, despite Ireland having one of the highest price-to-income ratios in the EU.

In the commission's post- programme surveillance report, a snapshot of how Ireland's economy is performing years since its bailout, some risks were nevertheless flagged for the Irish housing market.

It warned that though lending rules had been conservative, "risks are increasing in the housing market" and that "house price growth has been outpacing incomes, raising the risk of imbalances. House price growth is expected to moderate in the second half of 2022 as real incomes decrease and mortgage interest rates increase," it forecast.

A senior EU official said Ireland had seen steep rises in house prices and this was clearly becoming a "social problem".

"In the case of Ireland, our indicators point that housing price increases are not as high as we have seen in other member states. Prices have been increasing, but the pace of increases have not been as high as elsewhere," the senior official said.

"What we see in Ireland is there is very fast demographic growth. What we see is a...