The Bank of Ireland has recently stated that nearly 40% of residential property transactions in Ireland are being finalised at a rate of 10% above the originally listed price due to intense demand. The information was part of the bank’s newest quarterly report, which also indicated an upward revision to their forecast for a nearly 8% inflation in home prices this year and 4% next year.
Throughout summer, the anticipation for homes further escalated, consequently leading to nearly 40% of transactions being finalised at a minimum 10% premium compared to the initial listing price. The bank also observed a 6.2% increase in the average mortgage approval for home purchases, which stood at €318,300 in July, implying prospective increases in home prices, motivated by the growth in wages and household incomes.
Conall Mac Coille, the Chief Economist at the bank, alerted that the existing high levels of job and population growth might not be maintainable in the future, indicating the visible stress on housing, infrastructure, and public services. Noting that pay growth (5.6%) and house price inflation (9.6%) rates in Ireland are beginning to diverge from other eurozone nations, he emphasised the potential risk to the nation’s competitiveness. He also added that house prices are at their highest relative to the eurozone since 2009.
Mac Coille expressed that the 2025 budget should strike a balance between providing infrastructure promptly and cost-effectively while avoiding measures that could overheat the economy.
The Bank of Ireland, in its report, revised its forecast downwards for Irish GDP growth this year, predicting a 1% contraction due to unstable data and statistical distortions. Nonetheless, it projects the national economy, as measured by modified domestic demand, would increase by 2.3%. The Bank also mentioned that the Irish economy has experienced swift expansion again in 2024, which became apparent in the bank’s revised forecast for employment growth of 2.4%.
The Bank of Ireland highlighted that an increase in domestic growth this year is being facilitated by a boost in consumer spending by 3%, due to wages growing faster than inflation. The €8 billion Budget plan for 2025 proposed by the Government, which incorporates a growth of 6.9% in national spending, is expected to bolster domestic demand in the coming year.
Despite the challenges in evaluating precise economic indicators, it is clear that the export sector is faring well and will be a key contributor to the anticipated GDP growth of 3.5% in 2025, according to the Bank of Ireland.
This economic forecast by the Bank of Ireland echoes similar findings by the Central Bank last week, which pointed out the continuing robust growth of the economy, driven by a vibrant domestic economic activity. However, it also cautioned that additional fiscal stimulus from the budget may lead the economy to outpace short-term projections for growth.