Evidence from other European countries in recent years suggests that sharp house price rises do not necessarily turn into a sharp downward price spiral.

This is one of the findings in April’s UK economic brief from the Royal Institution of Chartered Surveyors.

Both Ireland and Holland witnessed from 1995 to 2000 real house price rises of 113% and 68% respectively compared to 44% in the UK. In Holland prices in real terms stagnated for around two years up to early 2003 due to a weakening economic climate with unemployment rising fairly sharply.

However, interest rate cuts and an improvement in economic activity has led to some rises in the past year.

In Ireland, the market weakened slightly in 2001 with prices falling 2% in real terms for the year to Q1 2002. The weak housing market reflected a sharp slowdown in economic growth from a blistering 10% in 2000 to a more sedate 4% in 2001 and even less in 2002

As in Holland, falls in interest rates and a gradual economic turnaround has meant that Irish house prices are rising firmly again, up 22% in real terms over the past two years

The Irish market has been boosted by the fact that mortgage rates are variable like the UK, and therefore interest rate cuts have fed quickly into housing demand

The key lesson from both Ireland and Holland is that a softlanding for the market is quite possible even after rapid price gains. Moreover, the outlook for prices will continue to be dictated by current economic conditions and interest rates rather than by past house price movements.