Houses are overpriced by 7%, adding tens of thousands of euro to prices above where they should be, a new study has found.

It says property was undervalued between 2011 and 2018 after the housing crash but a savings boom during the pandemic finding its way into the housing market has pushed up prices, overvaluing homes now.

ESRI's Quarterly Economic Commentary notes that housing demand increased during the pandemic as certain households accumulated savings. Meanwhile, public health-related lockdowns, the disruptions to supply chains coupled with the increase in inflationary pressures had an adverse impact on housing supply. This has led to a swift pick-up in the nominal growth in house prices.

The state-funded think tank believes that "evidence of over-valuation is present since the pandemic".

One of its economic models posits that house prices were overvalued by 7% at the end of last year, but prices have continued to rise since then.

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At the average property price in December last year, a 7% "overvaluation" would mean a house would cost €340,750 instead of €318,500, or €22,250 more.

Professor Kieran McQuinn of ESRI commented: "Obviously as we move into 2022 we've seen continued increases in house prices, running up to 15% year-on-year, so it's likely that overvaluation has possibly increased somewhat."