June plunge in house prices is blamed on distressed auctions
Published 28/07/2011 | 05:00
THE pace in property price falls picked up last month with experts blaming the distressed property auctions for the sharper than normal price plunge.
The fall in house prices in June was the fastest for more than two years.
Prices dived by 2.1pc with sharper declines for homes in Dublin, new figures from the Central Statistics Office show.
Over the last year the price of the average house has fallen by 13pc.
And prices in Dublin fell by 2.4pc last month, reversing a gain in May.
Prices are now down 42pc since the peak.
Economists said the recent distressed property auctions had accelerated the price declines. The average house price is now €175,000 across the country, a fall of €136,000 from the peak in late 2007.
For Dublin, the average house has lost €205,000 in value and is now priced at €225,000, according to calculations by Dermot O'Leary of Goodbody Stockbrokers which are based on the CSO figures.
The Allsop distressed property auctions, the first of which was in April, were probably responsible for prices falling so much, Mr O'Leary said.
Properties were offered at as much as 60pc below prices they fetched at the peak of the boom.
Another fire sale is scheduled for September in a move which means property prices could continue to fall sharply.
And a recent poll of Irish economists has found that most of them expect prices to fall 10pc on average this year.
Prices in Dublin are now 49pc lower than the top of the market in February 2007, with apartments down 54pc.
Outside Dublin, the drop from peak has seen property prices 39pc lower, prompting economists to predict sharper declines outside the capital are on the horizon.
Mr O'Leary said Dublin property prices were near the bottom, but it could be a while before they start to rise again.
But Alan McQuaid, an economist with Bloxham Stockbrokers, said it was likely prices would fall by more than 10pc across the State in the next year.
"Given weak labour market conditions and the continuing lack of available bank credit it is hard to be optimistic on the prospects for the property market in the immediate future.
"Ireland's banks, needing to bolster their balance sheets, are focused on raising capital and selling assets rather than expanding their mortgage books," he added.
He added it could be five years before house prices improve along with the labour market.
"That said, the level of any rise over the next few years is only likely to be in single digits as banks adopt a more cautious stance to lending than in the Celtic Tiger era, interest rates return to 'normal' and the introduction of a property tax for principal homes of residence all weigh negatively on the market," Mr McQuaid said.
Meanwhile, lender KBC Bank has passed on the latest ECB rise to its variable-rate mortgage holders. The variable rate will rise to 4.5pc from September 1.