HOUSE PRICES will fall by 10 per cent this year, and have already dropped 16 per cent since their peak, according to the Permanent TSB and the Economic and Social Research Institute (ESRI).
Average national prices fell 9.1 per cent in 2008, after a 7.3 per cent drop in 2007, the Permanent TSB/ESRI house price index shows. In December, house prices fell a further 0.9 per cent.
Commuter counties are suffering the steepest price falls, Permanent TSB’s general manager of business strategy Niall O’Grady said.
Average selling prices on properties in Louth, Kildare, Meath and Wicklow plummeted 16.8 per cent in 2008 alone compared to a decline of 11.7 per cent in Dublin and 10.2 per cent for properties outside Dublin.
“The message is clear; after a decade of exceptional growth, we’ve entered a period of retrenchment in house prices and while the impact is being felt everywhere, there are certain areas such as commuter counties where the pressure has been particularly intense,” said Mr O’Grady. The average price paid for a house nationally in December 2008 was €261,573, compared to an average national price of €310,632 at the end of 2006.
House prices have now fallen back to mid-2005 levels. If the effects of steep climbs in the consumer price index (CPI) are taken into account, prices have fallen 25 per cent from their peak in real terms.
Other house price surveys have suggested more significant declines in property values over the past two years. Estate agent Sherry FitzGerald, which keeps track of house prices using repeat valuations of properties, says house prices have already fallen 40-50 per cent.
ESRI economist David Duffy said the methodology used by Permanent TSB, which uses actual transaction prices, remained accurate, despite the smaller sample. The transactions are based on purchases made by mortgage customers of Permanent TSB, which fell 35-40 per cent last year, with the number of investors and second-time buyers falling the sharpest.
Mr Duffy said that because the transaction prices do not form part of the index until the mortgages are drawn down – which can be up to two to three months later – the index may lag current developments in house prices.
The continued downward pressure on prices is matched by a large drop-off in mortgage lending, which is now growing at its lowest annual rate since 1986.
“Confidence is at the heart of this,” said Mr O’Grady. A property tax will have “a negligible impact” on house prices, which will fall in line with rising unemployment and economic contraction, he said.
