Staying cool on property
Thursday March 29 2007
Many will be pleased enough at the prospect of a restoration of sanity in what has been an unprecedented period of rampant growth.
The cycle of soaring values had to correct itself and it is to be welcomed that the easing off has at least been gradual.
The brakes on what has been been a heady ride, have come in the form of interest rate rises.
Analysts predict that by June the European Central Bank could fix the rate at 4pc.
Should they be correct then the cost of borrowing would be double that of a year and a half ago.
In such circumstances first-time buyers may well find the struggle to get on the property ladder overwhelming.
As one European economist suggested: "The move to 4pc is a sure thing. Another one can't be ruled out."
The impact of the rate hikes has already been registered for the period of November, December and January, where values were up by a mere 0.3pc.
Nonetheless some €25bn will still be taken out in new mortgages this year.
For the year as a whole, price rises are expected to be in the range of 3pc-4pc.
While the easing of pressure on values has been brought about principally by market forces there was also a political dimension.
Michael McDowell's now infamous remarks about the government not needing the hundreds of millions raised in stamp duty, has understandably led to an expectation that there may be a significant cut in the tax in a post election scenario. He is unlikely to garner too many votes from auctioneers, but there's no doubt that he will have struck an electoral chord on the issue.
As leading economist Dan McLoughlin explained all the indicators point towards a "soft landing". The fact remains that with demand far outstripping supply there are no grounds for believing that there is going to be any radical change in the market.
Yet confidence in the property sector has undeniably been dented, but as the Economic Social and Research Institute pointed out this week, the majority of people still expect prices to remain stagnant, rather than fall.
It also claims that 40,000 will be forced to adjust their spending habits to cope with the higher interest charges.
No-one is suggesting that the good times are over but they may not be quite as frequent.
And if the days of values doubling every few years are indeed over, few will regret their passing.
