Dr. Paul Egan:

A colleague and I did a bit of work in this regard looking at the vulnerability in Ireland's residential real estate market in December 2024. We put some of the data through some of the models we have, which look at the level of overvaluation based on the fundamentals. They include an affordability measure, which includes household income and interest rates along with things like the population in the house-buying age, that is, between 25 and 44, as well as the supply, which shows that house prices are overvalued by a measure of approximately 8%. Looking across some of the other vulnerability measures, such as price to income, price to rent, debt to income and things like that, we saw they were relatively stable. There was definitely a level of overvaluation, however. There is a danger that households could be vulnerable if there was a labour market shock, a sudden rise in unemployment or a decline in real wages. Those factors could maybe see a more abrupt or harmful adjustment. It is probably something to be vigilant of.