House prices still far from bottom, warns economist
Monday May 10 2010
A LEADING economist has predicted house prices could fall to the pre-bubble average of €131,000 before the recession hits rock bottom.
Trinity College Professor Brian Lucey delivered the bad news to auctioneers and estate agents at the annual conference of the Institute of Professional Auctioneers and Valuers (IPAV) in Donegal at the weekend.
He said that the trend he was predicting over the next three years was "not unusual" in house price busts.
"I have no idea what the house price bottom is but I think it is going to fall more. We are not at a bottom yet.
"If prices over the next three years revert to pre-bubble trend, new house prices will drop to €131,000, a fall of 60pc," he said.
But he described as astonishing and appalling the lack of house price data that would give a more accurate picture.
He said that at the height of the bubble, developers were "running fast just to stand still".
"If you've got a tsunami of development land, fuelled by cheap credit and non-existent planning regulations and a government that is like a crack addict on the money coming in from stamp duties then you have to run ever faster to try and develop more quickly," he said.
He also warned that the economies of Portugal, Ireland Italy, Greece and Spain were "significantly linked" in their banking systems.
"This is the love that dares not speak its name," he said.
A more upbeat Patrick Koucheravy, economist with CB Richard Ellis, said there were signs the investment market had picked up this year.
The retail market was also showing month-on-month growth in retail sales in 2010 but he predicted further casualties as retailers struggled to maintain margins in a competitive market place.
He added the land market would be the last to recover.
Incoming IPAV president Paul Reynolds told delegates that it was time to move away from the culture of blame.
Revive
He called for the introduction of a number of measures to help revive the property market, including the doubling of the €125,000 stamp duty allowance and the introduction of a single 5pc rate of stamp duty to replace the current 7pc and 9pc rates.
The IPAV is also proposing the capping of the stamp duty rate on all commercial transactions at 5pc. Fewer than 100 of IPAV's 900 members showed up in the plush surroundings of Solis Lough Eske Castle to hear the keynote speakers and be briefed on the tighter controls being imposed on the industry by the Property Services Regulatory Authority (PRSA).
Castlebar-based estate agent Tom Collins told PRSA chief executive designate Tom Lynch the industry was on its knees. He said some members were finding it difficult to pay their fees to the IPAV.
"The industry is in some sectors literally wiped out.
"Perhaps 200 or 400 people will be out of this position, out of estate agency business by the end of the year," he said.
He added they were unable to survive on sales percentages, which were as low as two, one or even half a per cent.
Tanaiste and Education Minister Mary Coughlan was the guest of honour at the IPAV dinner on Saturday night.
- Anita Guidera
Irish Independent
