House prices 'to fall until 2013'
Average property is set to drop in value by 60pc from peak of boom in 2007
HOUSE prices will keep falling for another two years and not bottom out until at least 2013, when the average price will have fallen by 60pc to €150,000.
The latest prediction comes as National Irish Bank said it would raise its variable rates by up to 0.95pc next month.
However, there are renewed hopes that the European Central Bank will signal a cut in eurozone interest rates when it meets tomorrow.
A cut in ECB rates may help the collapsing housing market.
Ireland is currently experiencing the most violent property crash in the western world.
Over the last four years, prices have fallen by 45pc to leave the average asking price at €194,000, according to the latest Daft.ie house-price index. The Central Statistics Office puts the fall from peak at 43pc.
Now it has been predicted that prices are set to fall for another two years with the average asking price to hit €150,000 before the market bottoms out, according to research by housing economist Ronan Lyons of Daft.
Mr Lyons bases his calculations on the assumption that banks will start lending again for mortgages.
If they do not, prices will go on falling by 4pc a quarter and continue to plummet until the end of 2014, when prices will have dropped by 70pc.
This would leave the average asking price at €115,000, down from €366,000 at the peak of the market in early 2007.
A survey last week indicated that up to eight out of 10 mortgage applications were being turned down by banks.
However, AIB is to run a pilot scheme, whereby it will ease off on its lending criteria for first-time buyers.
It has reduced the monthly amount of money it had said a single person and a couple should have left after paying bills for the purposes of calculating how much can be borrow.
Previously, couples had been required to have €2,500 a month left over after paying their bills. Now, the bank will accept €2,000.
Karl Deeter of Irish Mortgage Brokers said: "This is finally some good news for people who are looking to borrow. AIB's move is fairly pragmatic.
"The minimum left-over amounts were quite high and reducing them a little will free up a lot of lending because more people will qualify."
Meanwhile, National Irish Bank will increase its variable rates by between 0.2pc and 0.95pc from November 11. Its home-loan variable rate will be 4.25pc. The bank said this was the first rise in variable rates since June 2008.
Some 75pc of NIB's customers are on tracker rates and so are unaffected by yesterday's rises.
Savings rates are also set to decrease at the bank, with the popular eSaver rate to fall from 3pc to 2pc. Analysts are disagreeing over whether the European Central Bank will cut its key interest rates this week. The ECB may hold off cutting interest rates tomorrow as recent figures showed that inflation in the eurozone was rising.
However, they expect that the ECB will lower its key interest rate in the fourth quarter of 2011 and in the first quarter of next year, each time by 0.25pc to 1pc.
But the economic situation has deteriorated so dramatically since then that a poll of leading economists by the German business daily 'Handelsblatt' showed the majority of experts in favour of an immediate cut in rates in order to avert outright recession.