Wednesday 16 October 2019

House prices could plunge 70pc from peak, says report

Charlie Weston Personal Finance Editor

HOUSE prices have further to fall, the country's biggest stockbroker said yesterday.

Davy said house prices were showing no signs of stabilising and could plunge as much as 70pc from the peak reached five years ago.

The new prediction on property prices came as leading ratings agency Moody's indicated that arrears had shot up.

Davy said uncertainty about the property market and a chronic lack of mortgage lending were the main reasons that prices would go on falling.

Economist Conall Mac Coille calculated that prices have already dropped by 55pc from the level they were at during the boom.

This was higher than the official figure of 48pc calculated by the Central Statistics Office.

Both bad bank NAMA and Goodbody Stockbrokers said this week that official figures were not recording the true extent of property price falls.

"Because the CSO measure is based on mortgage transactions, it excludes cash purchases and lags developments in the property market by several months," Davy said.

Affordability measures indicated prices were now approaching sustainable levels. But several factors, including the constraints imposed by banks on credit and a shrinking pool of potential first-time buyers, will hold back demand, the report stated. "Reports from estate agents and auction dealers suggest that peak-to-trough declines of close to 60pc have already occurred and that cash purchases now account for almost 30 per cent of all transactions. So the CSO measure probably understates the true decline in property prices."


The report noted a sharper decline in Dublin, where prices have declined by 57pc compared with 43.5pc in other areas.

Earlier this week, Goodbody Stockbrokers estimated that house prices may have fallen by around 60pc since the peak, with recent auctions by Allsop Space showing a 68pc decline.

However, the Davy report said the auction results may overstate the level of decline -- because they represented distressed sales. This was also noted by Goodbody, which pointed out that the auctions included a relatively small number of properties.

Meanwhile, the number of homeowners in arrears has shot up 92,000, figures from leading ratings agency Moody's indicate.

This is nearly 18,000 more families behind on their repayments than recorded by the Central Bank last month.

Moody's warned of a "rapid deterioration" in the condition of €51bn worth of mortgages sold on by our banks.

It said that at the end of January almost 12pc of the loans hadn't been paid in more than three months.

This was up from 10.14pc at the end of October.

If the 12pc arrears is applied across the entire residential market it means that 92,116 home loans are in arrears for three months or more.

Moody's figures have consistently been more up to date than the Central Bank data.

The ratings agency said that 4.23pc of mortgage loans were a year or more in arrears. This translates into 32,525 home loans a year or more behind on their payments for the entire market. The London-based ratings agency said the outlook for Irish mortgages was negative. It predicted that unemployment would rise to 14.7pc this year and falling house prices will increase the size of losses on defaulted mortgages.

Irish Independent

Also in Business