Irish property prices are currently overvalued by 8 to 10 percent, the Economic and Social Research Institute (ESRI) said in its latest Quarterly Economic Commentary.
The institute’s analysis considered various factors, including housing prices, disposable incomes, interest rates, housing supply, and the proportion of the population aged 25 to 44—the key demographic for homebuyers.
The ESRI highlighted concerns about the financial vulnerability of households burdened with high levels of mortgage debt. It warned that such households could face significant challenges if unemployment rises or wages decline, potentially leading to financial distress.
The report also raised alarms about the rapid acceleration in house prices throughout 2024, drawing parallels to the property market crisis of 2007-2012. It cautioned that the current trajectory could result in a painful market correction if left unchecked.
The ESRI urged the Central Bank to exercise vigilance and prudence when evaluating mortgage lending rules.
According to the Central Statistics Office, property prices have increased by 10 per cent over the past year, placing them 14 percent higher than their peak during the 2007 housing boom.