HOUSE prices will fall by almost a half before the economic downturn ends, a leading economist predicted yesterday.
Prices have already dropped by some 25pc since the height of the housing boom at the end of 2005, said Jim Power, chief economist with Friends First. But he expects a further slide of "up to 20pc".
"People may be interested in buying again but they cannot get access to credit. So, if you are in an environment where buyers cannot get credit but there's a lot of excess supply, to me it is clear [prices] are going to adjust further in a downward direction," said Mr Power. "At the end of it I wouldn't be at all surprised if there is a 40pc adjustment from peak to trough."
Yesterday the giant Swiss bank Credit Suisse came up with a similar forecast, saying Irish house prices could fall 30pc to 40pc.
The gloomy picture was presented in the Friends First quarterly economic outlook yesterday, with Mr Power predicting 2009 would be even more challenging. He also predicted job losses spreading outside of the construction sector.
"The economy is going through a very difficult housing market adjustment which is being exacerbated by a lot of negative external developments, such as exchange rate movements, and the whole global credit situation," he said.
He expects no growth for two years, with a 1pc decline this year followed by expansion of 1pc in 2009.
"We are not going to wake up on the first of January next year and find this is all over."