House prices must drop 40pc to restore investor confidence
PROPERTY prices need to fall by about 40pc or by around €100,000 before it would make sense to consider investing in houses, a report from Irish Mortgage Brokers and an academic indicates.
House prices in Dublin need to fall from €283,800 to around €179,000 for property to be a good investment.
Similar percentage falls are needed in Cork and Galway, the report by financial adviser Karl Deeter and lecturer Frank Quinn says. "Our calculations indicate that from an investor perspective the time has not yet arrived for a confident return to property for investment," the 'Residential Property Investor Report' says.
Asking prices for a house in Cork of €248,000 need to fall to €141,000, while prices in Galway need to drop from €235,000 to around €141,000.
The report concludes that "over-valuation is still the dominant characteristic of the Irish residential property market".
The report adds: "Falling rents, declining property prices and changes in both lending and taxation policy have brought enthusiasm and confidence in the property sector to all-time lows."
Oversupply of housing in the market is a major issue, it stressed.
But the study goes on to point out that property "may be hibernating, but it isn't dead".
Investors who use sound valuation methods, are considerate of financing costs, and get good professional advisers may be able to profit from property over the long term.