April 25 (Bloomberg) -- Rising property prices and higher interest rates have probably created a bubble for Ireland's housing market, the Economic and Social Research Institute said, expressing its concern about the record growth.
``We had an overvaluation of about 15 percent in 2005, according to the OECD,'' Alan Barrett, senior economist at the Dublin-based institute, said in a report published today. ``If you combine that with accelerating prices and interest rate increases, it's impossible not to come to the conclusion that the probability of there being a bubble has increased.'' The ESRI warning comes two weeks after Ireland's central bank said the housing boom may be unsustainable and poses a ``significant risk'' to the economy. Irish house prices have almost quadrupled in the past decade as companies add workers, fueling demand for property. Mortgage debt has more than doubled in the past three years. House prices may decline by more than 15 percent if the property bubble bursts, according to Barrett, who said he takes the over-valuation estimate by the Paris-based OECD ``very seriously.''
Bloomberg.com
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