SSIA money could boost house prices by as much as 10 per cent as consumers' confidence in the property market remains strong despite the threat of higher interest rates, according to a new survey.
The survey of SSIA holders conducted by IIB Bank and the ESRI reveals that at least 10 per cent of the estimated €16 billion scheme will be spent on property, which translates into purchasing power of over €10 billion.
Despite double-digit price inflation at home, Irish property is clearly preferred to more exotic overseas investments. The survey found that SSIA holders intend to spend about three times as much on Irish property as on property overseas.
According to the survey, consumers expect a steady increase in domestic property values with far fewer now expecting prices to fall in the coming year.
ESRI economist David Duffy cited fundamental factors such as economic and population growth and low borrowing costs as the main drivers for growth over the next 12 months.
But in terms of affordability, although most consumers are prepared for higher interest rates, up to 50,000 borrowers will find higher rates will put a strain on household spending, the survey found.
Not surprisingly, IIB chief executive Tom Foley is bullish on the prospects for the property market and added that the survey suggested higher interest rates shouldn't threaten the property market.
IIB chief economist Austin Hughes suggested that the survey results showed most borrowers could cope with higher interest rates.
He also encouraged by the high proportion of SSIA holders, some 40 per cent of respondents, who expressed the desire to reinvest their funds in other savings products as a sign that savers intended to use their windfalls wisely.