Property prices set to plunge 40pc from their peak
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THE housing market is going through a drastic correction at the moment which will see prices fall as much as 40pc from their peak, according to a survey of economists.
Prices will continue declining for the rest of this year, with no return to price growth until 2009 at the earliest, the economists believe.
House prices peaked in January/February 2007 but have been falling for the past 16 months.
Now a number of Irish economists have predicted at least another 18 months of property-price plunges.
According to the survey conducted by 'Finance' magazine, Dermot O'Leary of Goodbody Stockbrokers said he expected the price correction to last until the end of 2010.
The pessimistic predictions come a day after the latest house-price survey from Permanent TSB/ESRI.
It found that prices dropped by 5pc in the first half of this year, and by almost 10pc in the past year.
Almost €40,000 has been wiped off the average price of a house nationally since January 2007, according to the ESRI index.
But as the Permanent TSB/ESRI index is based on mortgage approvals, the house prices it reflects can be up to three months out of date. For this reason, the economists surveyed felt that the index underestimated house declines.
They said price falls were expected to be sharpest for properties in the €1m-€2m range, but many economists are expecting sharp price declines for houses under €1m.
However, some of the economists surveyed said they expected the pace of decline to slow over the next year.
Economist Noel Griffin, of Bank of Scotland, said: "Prices will continue to fall, as the current environment is one of a loss of confidence, increasing unemployment, higher inflation and lower disposable income."
Less pessimistic were Dan McLaughlin of Bank of Ireland and Alan McQuaid of Bloxham Stockbrokers, although they both predicted further price declines this year.
Mr McQuaid said prices were likely to continue to drift lower in the early part of 2009, unless the Government took remedial action in the next Budget, or the European Central Bank lowered interest rates.
"Overall, house prices will be back on a rising trend in the latter part of 2009 and in 2010, though the extent of the gains will be in low, single digits."
Mr McLaughlin said confidence in the economy was poor and house prices may not stabilise until European interest rates start to fall.
The sharp fall in house prices comes after a decade of rises. House prices nationally have risen by 267pc since 1996, according to the Permanent TSB/ESRI house price index.
- Charlie Weston Personal Finance Editor
