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Houses – will they keep falling this year?

mattc

12/04/2011 17:39:16

AVERAGE house prices are down to levels last seen in 2002 after a 38% fall from the peak, the latest Permanent TSB/ESRI survey reveals.
Experts said prices were still falling at the end of last year but at a lower rate than the same period in 2009.
House prices came down by 11% over the course of last year.
The report said the figures compared with a fall of 18.5% in 2009.
The report found the average price being agreed for a house at the end of last year was €191,776, compared with €311,078 at the spring 2006 peak – a fall of €120,000.

Houses more affordable
The average first-time buyer now requires just 13pc of their disposable income to pay a mortgage, research from DKM Consultants and EBS shows.
Monthly mortgage payments for the average new buyer have fallen to €639, half of what it was in 2006. First-time buyers now make up almost half of the shrunken mortgage market.

Predictions vary on how far prices will fall
Most commentators expect house prices to continue to fall this year. However, predictions on how far they will fall vary widely. Predictions from 20 different economists and ratings agencies (in a survey compiled by the website NAMAwinelake) shows prices falling between 80% from the peak to 40%. UCD economist Morgan Kelly has predicted prices falling 80% from peak – that would mean average prices falling to €65,000. Most economists/analysts are predicting a fall of another 5% to 10% this year.
Note that even when prices reach the bottom they may stay there for a while.

Some reasons why prices may continue to fall:
There are continuing difficulties for people who seek mortgage approval. Just 14,000 mortgages were approved in the first nine months of 2010, compared with 80,0000 in the same period in 2005.
NAMA may release property on to the market.
Repossessions and foreclosures may increase this year. The Irish Brokers Association is predicting a tsunami of 15,000 to 20,000 repossessions in 2011.
Higher taxes have dampened spending and consumer confidence.
There is no urgency to buy for most young people.
There is an oversupply of as many as 130,000 houses.

But house prices may rise:
Dublin has a shortage of housing – this may lead to a two speed housing market.
Stamp duty has come down from between 7% and 9% to 1%
House prices have fall to the point where it takes, on average, four times the average first-time buyers’ income buy one.
Housing construction has sharply declined.

Comments 1

Mike From Youghal 12 Apr, 10:29
Hi Matt. On one of your story's today, you gave out about people with second homes and how these people drove up the prices of houses in Ireland.
I am one of these people and I think i speak for thousands of people who had origanally purchased their prime home in the early 90's when interest rates were over 13% (which ment house prices were low)and had some extra money when the interest rates dropped. At this time I went to increase my pension but did not believe a word the bank told me. I decided to pay a second morgasge instead of a pension. Like thousands, we now have 2 x morgage's and no disposable income and jus because we did not believe the banks, we are percieved as the bad people !! I think you have got it wrong.
Regards Mike.