Much has recently been written about the property market with many observers suggesting that the market is very similar to that which prevailed in 2006/2007 when the tiger was finally slain.
Recently Philip Lane, Governor of the Central Bank, suggested that due to increased housing supply, including of student accommodation, higher interest rates, and potentially higher unemployment following Brexit, not only would house price rises halt in the near future but sale and rental prices would drop.
There is no doubt that house prices have risen and, in some cases are back at actual levels that prevailed before the bubble burst over a decade ago. However, in many ways, there the comparison ends.
It is our opinion that much of the property demand at that time was artificially boosted by a flood of easy credit (110% finance on an interest only basis) and a willingness of developers to build purely because they had permission to do so. Financial Regulation was light at best and the fundamentals were overlooked and the inevitable happened.
Demand today is healthy and, with developers only recently returning to the building site, it will be some time before adequate housing stocks have been restored in larger urban centres. In the provinces the stock of empty houses is fast reducing and some equilibrium is returning to the market.
Undoubtedly there is upward pressure on interest rates and it is likely that in the next 18 months some rise in rates will be seen. This will have a cooling effect on property sales.
However there are a few very significant differences between the market then and the market now.
In summary therefore, while prudence is always advised, we believe that it is wrong to directly compare today’s market with the pre-crash market and while it is probable that a slowdown in price growth will follow, it is most unlikely that we will see a return to the disastrous events of 2008 and after in this cycle.