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Maeve Sheehan: Bottom reached but banks must start to lend

A MODERN two-bedroom apartment with a balcony and a car parking space on the outskirts of Longford town might not be everyone's cup of tea. But with a €29,000 asking price, it's probably the cheapest two-bed in the midlands right now.

According to a review of 2011 property prices published last week, Longford prices are down 57 per cent from peak levels. But this particular bijoux apartment is down a whopping 83 per cent from its boom time value.

It would have fetched €175,000 during the boom, according to agent Fintan McGill. He has been trying to shift three-bed homes for at least 70 per cent less than their value during the boom.

"But this is the cheapest I ever had," said McGill. "I actually think that we are now at the bottom. Until the banks start releasing funds, we are going to stay there," he said. In support of his theory, he says he sold 14 properties in the final three months of 2011 and two in the first week of the year -- his best performance in three or four years.

Time will tell whether McGill is right. At this stage in the property crash, it's a race to the bottom. According to Ronan Lyons, economist with Daft.ie, the sooner property prices hit the bottom the quicker recovery can begin.

The big question is how much further property prices have to fall.

Three reviews of 2011 house prices published last week brought grim tidings for the property market. The property portal, Daft.ie, says asking prices fell by 52 per cent nationally from peak levels and asking prices dramatically tumbled by eight per cent in the last three months of 2011, a far greater fall than in previous quarters.

The rival property website, MyHome.ie, says asking prices fell by 14 per cent in 2011, by 43 per cent from the peak, with Dublin homes down 50 per cent from peak levels. Sherry FitzGerald, the largest residential sales group, says they fell by 59.8 per cent nationally and 64 per cent in Dublin.

The figures are averages, broad snapshots of what's happening across the country. Behind the figures, each county has its own story to tell, coloured by factors such as oversupply, demographics and location, location, location.

For instance, three and four-bed semis exist in a micro property market of their own, according to analysts. They are in such demand in some regions that asking prices have actually increased. MyHome.ie analysed asking prices in the last quarter of 2011 for three-bed semis, and found that they had stabilised in counties Monaghan, Roscommon, Wexford, Donegal, Mayo and Kerry, while they actually increased in Cavan (6.25 per cent), Clare (0.63 per cent) and Offaly (2.95 per cent).

The appetite for four-bed semis in Monaghan was so healthy that prices actually increased by 16.2 per cent in a year. In North Dublin, prices stabilised at €245,000 while in Dublin South, prices for the same property fell 6.5 per cent to €300,000.

Blips in micro markets such as these failed to dent the overall downward trend, however.

Nowhere was this trend more evident than in Dublin. Analysts are in general agreement that property prices in the capital have fallen harder and faster than anywhere else in the country.

According to Daft.ie they fell fastest in the city centre, down 61 per cent from the peak, followed by the south inner city where prices, are down 57 per cent from peak levels, and South County Dublin, where prices are down by 55 per cent.

In terms of reaching the bottom, Dublin could be ahead of the curve. "That's probably a good thing, in that Dublin looks closer to the finishing line than other parts of the country," said Ronan Lyons.

Munster, meanwhile, has shown the greatest resistance to plummeting house prices, according to Daft's analysis.

Cork properties have fallen 48 per cent since their peak, while in Kerry and Limerick they are down just 40 per cent and 41 per cent respectively. Even in the last three months of 2011, when asking prices were generally slashed by eight per cent, they fell by just 5.5 per cent in Munster.

This is not necessarily good news. "I think it's not to do necessarily with being less hit by the bust, I think it's just a delayed reaction," said Lyons. Another reason, of course, is that so little is selling.

For those fortunate enough to have money to invest, house prices have never been cheaper. According to Daft's analysis, the cheapest one-beds in the country are to be had in Roscommon (€40,000), Waterford (€49,000) and Mayo (€50,000).

The cheapest three beds are to be found in Cavan (€101,000) and Leitrim (€97,000). In Dublin they are to be found in the western suburbs, where the average asking price is €188,000.

Prices here have fallen 53 per cent from peak levels, according to Daft.ie, suggesting they still have a way to fall.

The most expensive three-beds, predictably, are in south Co Dublin, where average asking prices of €333,000 have dropped 57 per cent since the boom. But according to Lyons, south Co Dublin residents might be closer to the finishing line.

This optimistic analysis is cold comfort to the thousands in negative equity who have seen the values of their homes in freefall while their mortgages are stuck at boom-time prices. Where will it end, they might ask.

Some analysts have predicted another five per cent drop for 2012. Lyons has suggested a fall from 60 per cent of peak values is to be expected.

Angela Keegan, of MyHome.ie, says: "Our hope would be that the worst is behind us, but we'd be loath to call the market given the current economic conditions and the euro crisis. We believe when we do turn the corner, the three-bed semi in urban areas will be the first to recover."

So house prices hurtle towards the bottom and then what? According to Lyons, once at rock bottom, they should stay there, for a while at least. "What the market needs is stable prices, not rising ones," he says.

Sunday Independent