DUBLIN, June 12 (Reuters) - A protracted delay in addressing localised housing shortages in Ireland, particularly in Dublin, has the potential to put prices on an unsustainable path again, the country’s central bank warned on Thursday.
House prices, which quadrupled during Ireland’s Celtic Tiger boom years, fell by more than half from 2007 in a devastating property crash that led the country into a costly bank rescue and the EU/IMF bailout it completed last year.
Prices have begun to recover over the past two years and while they remain 48 percent below peak in Dublin, house prices in the capital rose 17.7 percent year-on-year in April compared to a 1.3 percent increase elsewhere in the country.
In its biannual macro-financial review, the central bank said supply shortages were an important factor in recent house price increases, with just 8,000 new units built last year compared to an average annual output of about 33,000 since 1970.
“By their nature, they take time to address and, accordingly, should be a priority for policy, if imbalance in the housing market is not once again to become a potential source of financial instability,” the central bank said.
“A protracted delay in addressing these shortages has the potential to put house prices on an unsustainable path. Forward-looking indicators such as commencements notices do not give the impression that an increase in the supply of new builds is likely any time soon.”
Ireland’s government said last month that while the crash had left an overhang of stock in many parts of the country, it recognised that there were particular concerns about housing supply in Dublin.
In a policy document aimed at helping bring about a sustainable recovery in the construction sector, it said local authorities in Dublin were already working to identify housing developments capable of being delivered in the short-term. (Reporting by Padraic Halpin; Editing by Catherine Evans)