Trends this week: Mortgage interest rates are on the way down
Home buyers can look forward to another silver lining in their prospects of buying a home. As well as falling house prices, mortgage interest rates are also on the way down.
Furthermore, should income tax be increased in next Tuesday's Budget, mortgage interest could prove even more attractive for taxpayers who see home buying as one way to reduce their tax bills.
According to Geoff Tucker, economist with Hooke and MacDonald, the European Central Bank may cut interest rates by as much as one full percentage point by the middle of 2009.
He estimates that the average price of a new home in Dublin is now down 25pc from peak levels. Consequently, Mr Tucker is forecasting a pick-up in transactional activity during 2009.
However, he acknowledges that banks will be more cautious about lending and he also sounds a note of caution about future supply in Dublin's housing market.
"Despite the reasonably strong showing from the most recent statistics on planning permissions, I expect completions in Dublin to fall in 2009 based on the trends in new home starts.
"Yet starts have slowed considerably. We expect starts to come in around 5,300 for 2008 as a whole in Dublin, which will result in completions falling further to possibly 6,500 units in 2009."
He says that most developers have put their plans for new developments (or new phases of existing developments) on hold and are focusing on selling off their existing stock.
"Once that stock begins to clear, they will look at starting new projects.
"As a result I expect completions in 2010 could be less than the 6,500 units we are expecting for 2009."
Meanwhile the latest survey from estate agents Knight Frank (KF) show that overall Irish house prices have fallen from being the 31st most expensive in the world to being the 38th most expensive. Dublin is still the 16th most expensive place to buy a prime home at €5,670 per sq m.
With prices in Monaco rising by 30pc in the 12 months to June 2008, it has become the most expensive place to buy a prime residential property at €51,000 per sq m. London was next at €44,620 per sq m. In the KF survey of the top 20 most expensive locations only four showed price declines: Dublin, Florence, Tokyo and Courchevel in the Prime Alps.
All the other areas increased or showed no change. Dubai saw a 52.6pc increase to €6,300 per sq m. while Beijing prices rose 43pc to €2,784 per sq m.
- Donal Buckley
