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New house prices could fall by up to 20pc amid coronavirus uncertainty – report

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New house prices in Ireland could fall by as much as 20pc if the current economic upheaval caused by the spread of the coronavirus continues.

This is according to a report from Davy Stockbrokers, which suggests the financial markets have priced in a decline of 15-20pc in the value of homes.

The report comes at time of great uncertainty in global financial markets.

Meanwhile, land values for house building purposes could fall by up to 50pc.

The report looked at the current share price of Cairn Homes and Glenveagh Properties, two listed housebuilders, which are trading at a price of .67 times and half their book value respectively.

As social isolation continues, it is likely house builders will see fewer visitors on their sites in the coming weeks.

Both builders and estate agents are already trying to reduce risk of spreading the virus by moving to appointment only viewings.

This approach should see continued sales, but at a lower rate than at the start of the year, according to the report from Davy Stockbrokers.

However, in the case of both Cairn and Glenveagh, both companies are in good health in relation to their balance sheets, the report said.

In addition, the two have high levels of forward sales, which they had accumulated towards the end of 2019 and early this year.

Cairn has 55pc of its 2020 target forward sold, while Glenveagh has just under 50pc of its target forward sold for the year.

The forward sales fall into three categories; sold, signed, reserved. The ‘reserved’ category is the main source of any cancellation risk.

In an adverse scenario, assuming a 50pc cancellation rate on these units and that reserved units account for 40pc of forward sales, Glenveagh would still have close to 40pc of its full year target which would complete, according to the report.

In Cairn’s case, its large exposure to the private rental sector within its forward order book means that it likely has a much higher level of signed units.

Online Editors