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The Irish Property Price Bubble?

Smith, Alice Louise (2003) The Irish Property Price Bubble? Undergraduate thesis, Dublin, National College of Ireland.

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Abstract

Over the past six to seven years, Irish house price inflation has reached levels unimaginable to even the most reliable of economists ten years ago. Nowadays, there are
two extreme opinions floating about which relate to the factors that have led to the remarkable trends in the Irish property market. The first is that the price increases have
been dnven solely by market fundamentals - economic, demographic and social. In such a case, excess housing demand should not be considered a problem and the current price level should be sustainable. On the other hand, it has also been indicated that a certain degree of speculative housing demand exists in the market. In this scenario, a price bubble has developed, whereby house prices appear to be ever-increasing. That is until the case arises when some shock to consumer confidence stunts this speculative demand and triggers the ultimate burst of the bubble. These are the commentators that frequently warn of a crash in house prices similar to what happened in the UK housing market in the late 1980s.

My research findings agree, to a certain extent, with both critics. Indeed, a large percentage of the house price inflation in recent years can be put down to basic market
fundamentals. However, on studying investor activity and first-time buyer behaviour during this same time frame, it is evident that speculative demand has been a feature of
the housing market. Surprisingly, government intervention, instead of taking control of the situation, has actually been the principal driver behind this type of demand. Based on analysis of the research discoveries, I estimate that the Irish property market is in for a rather difficult time in the near future. With increased unemployment becoming
potentially threatening, property in certain parts of the country looks set to lose some of its value. Furthermore, other trends, demographic in particular, are emerging that could seriously affect future housing demand levels and, therefore, house prices.

Item Type: Thesis (Undergraduate)
Subjects: H Social Sciences > HD Industries. Land use. Labor > Specific Industries > Property Industry
H Social Sciences > HB Economic Theory > Business Cycles. Economic Fluctuations
Divisions: School of Business > BA (Honours) in European Business and Languages
Depositing User: Aisling Gorby
Date Deposited: 13 Apr 2010 18:04
Last Modified: 14 Jan 2015 16:09
URI: http://trap.ncirl.ie/id/eprint/48

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