Bloomberg News, Published: 03/09/2014

Ireland is in the midst of an “uncomfortable” property boom, as a shortage of homes and offices drives up values six years after a collapsing property bubble devastated the economy, Goodbody Stockbrokers said.

Values will continue to rise as supply remains limited, Dublin-based Goodbody said in a report published today. Home building is running at about a third of medium-term demand while no significant office completions are expected until 2016, the firm said.

“Irish property has been among the best performing asset classes in the world over the past twelve months, propelled by tightening supply and a broadening recovery,” Goodbody economists Dermot O’Leary and Juliet Tennent said. “The supply response to the recovery in property prices has been surprisingly muted to date.”

Home prices surged an annual 23 per cent in Dublin in July, pushing values 13.4 per cent higher nationally, government figures show. Construction of homes and offices in Ireland dried up in the wake of the worst real estate crash in Western Europe.

Values will continue to rise as supply remains limited, Goodbody forecast. Dublin homes for sale have been below 3,000 since November 2013, meaning 0.5 per cent of all homes are on the market, compared with an average of 1.1 per cent since 2007, Goodbody said.

“There has been a problem in terms of the price of houses rising in the Dublin area in particular,” Tanaiste Joan Burton told RTE today. “The housing market does have to be watched in a very, very careful way, but the critical issue is to increase supply in terms of social and affordable housing.”

No Bubble

Unemployment dropped in August to 11.2 per cent from 11.3 per cent in July, the Central Statistics Office said today. The jobless rate, which rose to 15.1 per cent in 2012, has fallen every month this year, as companies including Google and Airbnb hire in Dublin.

Talk of another bubble is “premature,” Goodbody said. “The Irish house price recovery is performing in line with the average of previous international cycles.”

Home prices in Dublin remain 43 per cent below their 2007 peak, while the national index is 42 per cent off record levels.