* Prime Dublin house price rises of 12 pct driving recovery
* Lack of supply set to see sharp urban price rises continue
* Housing starts at record low, building sector reeling
* Ill-planned boom leaves estates outside Dublin empty
By Padraic Halpin
DUBLIN, Aug 28 Five years after a huge property
crash devastated the Irish economy, prices are finally
stabilising, but a booming urban market where supply is scarce
and competition fierce is raising concerns about a new bubble in
House prices quadrupled on a decade of easy credit during
the boom years that earned Ireland the sobriquet Celtic Tiger,
then fell by more than half from 2007, leading the country into
an EU/IMF bailout, a costly bank rescue and leaving almost one
in five homeowners behind on their mortgage payments.
While prices began to rise again annually in June, some
urban pockets are driving the recovery, with properties in
Dublin being sold for 8 percent more than a year ago and higher
still in affluent areas where 30-somethings outbid one another.
Having built the wrong stock in the wrong places during the
boom - huge apartment complexes and out of town housing estates
- there is now a big lack of supply in the capital and need for
a battered construction sector to take the heat out of prices
that some estate agents say are rising by 1 percent a month.
"There's an element of craziness creeping back into it where
people are getting frantic," said Scott, a 37-year-old father of
two young children, after wading through the crowds to view a
four-bedroom, semi-detached house in leafy south county Dublin.
"Friends of mine have bought and gotten into bidding wars.
It feels like the olden days; it's kind of wrong."
It is families like Scott's, among the 305,000 households
living in rented accommodation - twice more than five years ago
- that are primarily behind the surge in demand, having waited
patiently for prices to find a floor.
But the dearth of supply means the level of transactions has
barely risen, and with cash buyers snapping up every second
home, only one in every two mortgages approved are being drawn
down, keeping Ireland's stricken banks from reaping the
Property consultants Savills Plc say 20 percent of
its buyers are from abroad - mainly Irish residents keen to move
home - piling even more pressure on frustrated domestic buyers.
In Dublin, the number of properties for sale has more than
halved to just 3,000, research from Ireland's biggest property
website Daft.ie shows, giving rise to year-on-year price hikes
of over 12 percent in sought-after spots.
"If you've got rapidly rising prices, up by 10, 15 percent
year-on-year, something's wrong," said Daft chief economist
Ronan Lyons, who sees further annual rises of between 5 and 10
percent as quite possible until more supply arrives.
"If you decide tomorrow to build, it's still going to be 18
to 24 months before we actually get the supply, so if things are
already as bad as they are now, that's worrying."
New builds are rising in Dublin, but from a very low base.
Only 72 extra units were begun in the first five months of the
year, but even that was a 25 percent year-on-year jump.
House completions throughout Ireland also hit a record low
of just under 8,500 last year, down from an unsustainable 93,000
in 2006 but just a third of the 23,000 built on average a year
during the 1970s, when Ireland was a much poorer country.
In a country back in recession, conditions for a renewal in
house building are poor - construction costs are rising and
finance for developers scarce. Finance Minister Michael Noonan
is keen to use his upcoming budget to stimulate the sector, but
many of his colleagues want him to ease up on austerity instead.
The state-owned National Asset Management Agency (NAMA), the
"bad bank" set up to rid banks of soured property loans, will
also have only a limited role to play as much of its stock of
residential properties in need of completion are the apartment
blocks and "ghost estates" that litter the countryside.
Ireland's big builders have mixed views. The incoming chief
executive of CRH, one of the world's largest building
materials providers, told Reuters last week it was vital "not to
overplay the Dublin hand", with demand small and sporadic.
The CEO of building and home improvement supplier Grafton
, however, said it was time to start building again now
the "green seeds" of recovery were sprouting.
There are some signs of life among smaller players, too,
according to estate agents who have begun to field inquiries
into Greenfield sites for the first time since the crash.
"Developers have suddenly realised that there is a shortage
of good quality houses in certain areas, so there has been a
very strong focus on people looking for development land," said
Michael Grehan, head of residential property at estate agents
"How else do you get more supply out there? A lot depends on
the type of stock that comes into the market from the banks."
Lenders long-overdue response to the country's crippling
mortgage arrears crisis may hold the key to freeing up supply in
the short term. Repossessions are set to increase from near
non-existent levels after changes to the law, while some
struggling homeowners may take up options to trade down.
How exactly this plays out and crucially whether it will
unearth any prime Dublin supply is the big unknown.
Either way, Dublin needs targeted supply, and fast. A second
property bubble in a decade, albeit confined to a few particular
districts, would be unthinkable as Ireland emerges from its
"None of us want to go back to where it was; it's not
sustainable," said Grehan.