Home prices in Ireland rose at the fastest pace since February 2007 during the 12 months to September, adding to concerns that severe shortages of properties following the country's real-estate crash are leading to a new and dangerous price boom.
While it doesn't believe the price surge presents an immediate threat to the still fragile banking system, the Central Bank of Ireland earlier this month said it wants to impose new rules to prevent home buyers from taking on too much debt relative to their incomes and the value of the property purchased.
The Central Statistics Office Wednesday said house prices countrywide rose 1.8 per cent from August and were 15 per cent higher than in September 2013. In the populous Dublin region, prices climbed 23.4 per cent on the year, a slight slowdown from the record-high pace recorded in August.
Ireland's economy grew rapidly in the first six months of the year, recording a 7.7 per cent year-over-year rise in gross domestic product during the second quarter. But unemployment rates remain high and wages have yet to pick up. That has led to concerns that the surge in house prices isn't sustainable.
Ireland's housing crash was among the steepest in the world, and left prices of many properties 60 per cent below their early 2007 peak. Wednesday's data showed that prices are now on average 39.9 per cent lower than their peak of over seven years ago.
Rising prices should help the country's damaged banks somewhat mend their loan books.
But the central bank is worried that they might pose a longer-term threat to the stability of the financial system if buyers take on too much debt. In early October, it proposed new rules that would prevent banks from making more than 15 per cent of new mortgage loans to buyers financing 80 per cent of the purchase price through debt, and more than 20 per cent of new mortgages to buyers borrowing more than 3.5 times their income.
Year to September sees fastest growth since 2007.
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