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Scenarios for Irish House Prices

Author

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  • Kennedy, Gerard

    (Central Bank of Ireland)

  • McQuinn, Kieran

    (Central Bank of Ireland)

Abstract

In this note, a recently published model of the Irish residential mortgage market is used to generate likely scenarios for Irish house prices out to 2013. The model allows for the interaction between house prices and mortgage credit as well as key macroeconomic variables and housing supply. Future prices based on such models typically tend to assume that, where significant overvaluation has occured, prices correct back to some long-run equilibrium path. However, analysis of housing booms in a cross-country context reveals that prices often tend to overcorrect following a sustained house price boom. We discuss the results from our model in this context.

Suggested Citation

  • Kennedy, Gerard & McQuinn, Kieran, 2011. "Scenarios for Irish House Prices," Economic Letters 02/EL/11, Central Bank of Ireland.
  • Handle: RePEc:cbi:ecolet:02/el/11
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    File URL: https://centralbank.ie/docs/default-source/publications/economic-letters/economic-letter---vol-2011-no-3.pdf?sfvrsn=10
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    References listed on IDEAS

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    1. Barrett, Alan & Kearney, Ide & Goggin, Jean & Conefrey, Thomas, 2009. "Quarterly Economic Commentary, Winter 2009," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20094, April.
    2. Maurice J. Roche, 1999. "Irish House Prices - Will the Roof Cave In?," The Economic and Social Review, Economic and Social Studies, vol. 30(4), pages 343-362.
    3. Roche, Maurice, 2003. "Will there be a Crash in Irish House Prices?," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 2003(4-Winter), pages 1-16.
    4. Addison-Smyth, Diarmaid & McQuinn, Kieran & O'Reilly, Gerard, 2009. "Modelling Credit in the Irish Mortgage Market," The Economic and Social Review, Economic and Social Studies, vol. 40(4), pages 371-392.
    5. David Duffy & John Fitz Gerald & Ide Kearney, 2005. "Rising House Prices in an Open Labour Market," The Economic and Social Review, Economic and Social Studies, vol. 36(3), pages 251-272.
    6. Trevor Fitzpatrick & Kieran Mcquinn, 2007. "House Prices And Mortgage Credit: Empirical Evidence For Ireland," Manchester School, University of Manchester, vol. 75(1), pages 82-103, January.
    7. McQuinn, Kieran & O'Reilly, Gerard, 2006. "Assessing the Role of Income and Interest Rates in Determining House Prices," Research Technical Papers 15/RT/06, Central Bank of Ireland.
    8. repec:may:mayecw:n920799 is not listed on IDEAS
    9. McQuinn, Kieran & O' Reilly, Gerard, 2007. "A Model of Cross-Country House Prices," Research Technical Papers 5/RT/07, Central Bank of Ireland.
    10. Kieran McQuinn & Nuala O’Donnell & Mary Ryan, 2005. "Central Bank and Financial Services Authority of Ireland's model," Chapters,in: Econometric Models of the Euro-area Central Banks, chapter 11 Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Cronin, David & McQuinn, Kieran, 2017. "Credit conditions and tenure choice: a cross-country examination," Papers WP582, Economic and Social Research Institute (ESRI).
    2. McQuinn, Kieran, 2014. "Bubble, Bubble Toil and Trouble? An Assessment of the Current State of the Irish Housing Market," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).
    3. Kennedy, Gerard & McQuinn, Kieran, 2012. "Why are Irish house prices still falling?," Economic Letters 05/EL/12, Central Bank of Ireland.
    4. McGuinness, Anne, 2011. "The Distribution of Property Level Mortgage Arrears," Economic Letters 06/EL/11, Central Bank of Ireland.

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