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Adjustment in house prices far from over

So Standard & Poor's reckons we've hit the end of the adjustment in house prices. I am unconvinced. The banks are returning to a more traditional set of lending values, and, as such, will be lending less and scrutinising their clients more.

The traditional lending sum for a mortgage is 2.5 times annual income, to a value of 80pc-90pc of the house value. According to the CSO, the average yearly wage in Ireland is about €33,600 before tax. This means that, on average, the bank will lend €84,000.

If you have 20pc of the purchase price, this gives you a price point of €105,000. This might get you a distressed apartment, but is unlikely to afford a decent house.

Two average people pooling gives you borrowing power of €168,000 -- and if both have 20pc, that's a price point of €210,000 (it's worth noting these are best-case figures).

To illustrate further, someone earning the quite large sum of €100,000 can borrow €250,000, and with a large 20pc contribution of €62,500 would be able to afford a house worth the princely sum of €312,500. That does not get you a mansion in a leafy Dublin suburb, although it would probably stretch to a four-bedroom detached property down the country.

The property market is still scatterbrained, and has some way to go yet.

Daren Nestor

Co Limerick

Irish Independent