Measuring economic vulnerability in the Irish residential property market

<jats:p>Strong and sustained house price growth warrants close monitoring of potential vulnerabilities in the Irish residential property market, particularly in relation to valuation, household indebtedness, and the credit cycle. This article applies a holistic approach to assess overvaluation by combining econometric and non-parametric techniques. Four techniques point to overvaluation in 2025, with a composite measure suggesting overvaluation of around 17 per cent. This compares with a peak of over 40 per cent in 2006. A distributional analysis of the Price-to-Income (PTI) ratio suggests that the current episode of house price overvaluation may disproportionately impact middle-income households. Further analysis shows that indicators relating to indebtedness and credit conditions remain well below the peak level in 2008. These findings suggest that valuation pressures warrant continuous monitoring, but that current conditions are more consistent with structural imbalances in housing supply than with credit-driven price growth.</jats:p>