Seizures 'to take heat out of housing bubble'
AN expected increase in the number of house repossessions is likely to take the heat out of the Dublin house-price bubble, according to a new report.
The report by economists at rating agency Standard & Poor's is predicting that house prices will stabilise, ending this year flat and rising 1pc in 2014 and 2pc the following year, as the economy recovers.
"We believe the Irish property market will continue to stabilise next year before picking up slightly in 2015. Anecdotal evidence suggests that some urban regions, especially in Dublin, are already experiencing some stock shortages."
However, despite a "booming urban market", the research points to a levelling off in the pace of urban house price rises thanks in part to higher rates of repossession.
"The Central Bank of Ireland's revised code of conduct for mortgage arrears among other measures should make it easier for banks to repossess homes, and provides incentives for banks to resolve troubled mortgages more quickly."
This could curb the pick-up in house prices by increasing the number of properties on the market, according to economists Sophie Tahiri and Jean-Michel Six.
The main support for house prices at the moment is coming from families that held off making a purchase for six years while house prices dropped, the report said.
Those people are starting to buy now that prices are stabilising, according to the research.
Combined with limited supply in some urban markets, it has pushed up prices up to now – leading to the 12pc price annual rise reported in Dublin last month.
Despite such activity, Ireland's overall housing recovery remains fragile, according to the research.
On the plus side, house prices and construction activity are either stabilising or slightly improving.
The report says that "fundamental indicators", such as price-to-income and price-to-rent ratios, are hovering around long-term averages.
For now, the number of houses changing hands remains low, at about 5,800 every three months nationally this year.
There were 604 new housing units completed in August, bringing the total over the past year to 8,130.
The report looked at housing markets right across Europe, where prices in many markets continue to languish "amid persistently weak domestic economies, limited housing affordability, and tighter credit standards".