House prices to fall further then reach bottom in '11, predict S&P
A REPORT by credit rating agency Standard & Poor's has predicted that house prices in Ireland are likely to fall by another 10pc this year, before reaching the bottom next year.
But the report, which looks at housing markets across Europe, claims Irish house prices look undervalued by about 12pc at the moment when compared with long-term averages.
The agency says lower average mortgage rates have boosted affordability, but demand for housing remains weak.
It says high unemployment and economic weakness mean consumers will remain cautious this year, while oversupply of houses is also contributing to continuing price falls.
S&P says house prices seem to have steadied in most countries -- apart from Ireland and Spain -- but warns that a second dip in prices remains a possibility in several markets later this year or early next year.
It believes the downturn in European house prices from 2007 onwards may not yet have fully wiped out what it calls the "excesses" of the earlier housing bubble.
Mortgage lending continued to fall, however, despite falling interest rates contributing to a rise in affordability for buyers.
House completions are also falling, with 26,420 completed last year compared with 51,724 a year earlier, according to Government figures.
In the first quarter of the year, completions totalled 3,759 -- almost half of the figure recorded a year earlier.
However, rents continue to fall, slipping 13pc in the 12 months to March, following a 30pc decrease in 2009.
"We think the economy will likely remain unsupportive for another year at least," S&P said.
The report said consumer caution stemming from unemployment and fiscal tightening by the Government would contribute to further house price falls, with predictions of a further 10pc drop over the year before it finally hits a trough in 2011.
Meanwhile, the price slump has slowed in many European countries, including France, Italy, Spain, and the Netherlands.
But the report warned the correction may not be over, and said there was the possibility of a second dip in several markets, either later this year or in early 2011.
Before the credit crisis and global economic downturn, many economists predicted a soft landing for the Irish economy and property market.