Prices set to continue rising because of supply shortages, but others disagree, says industry source via IrishTimesBiz
“When it comes to forecasts for property price growth the focus is mainly on demand and supply,” he says. “However, the impact of rising interest rates and therefore repayment capacity seems to have been almost forgotten about. Some of the forecasts for growth this year seem wildly optimistic. Indeed it’s hard to see how an outright fall in prices this year and next can be avoided.”
His rationale is that until the middle of last year, a first-time buyer or mover borrowing €300,000 over 30 years could have got a mortgage rate of about 2 per cent with a monthly repayment of €1,109 a month. Since then, the European Central Bank has hiked rates by three percentage points. If rates go to say 5 per cent to keep the same monthly repayment of about €1,109, either the amount borrowed or property prices would need to fall by about 30 per cent. Cassidy is not saying that prices will fall by this amount but, as he notes, it illustrates the huge impact a rise in interest rates of just a few percentage points has on monthly repayments and affordability.
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