IRELAND’S PROPERTY market could be undervalued, a report said yesterday, with the steady fall in house prices caused by oversupply in the market.
However, the report from ratings agency Standard and Poor’s did not rule out further declines in prices.
In a report on the European housing market published yesterday, S&P said Ireland’s ongoing market correction “seems overdone”, and estimated prices were undervalued by about 12 per cent.
The agency said Irish house prices, which recorded an 18.5 per cent decline in 2009, were showing a marked difference to other European markets, which have displayed signs of pulling out of the recent price correction.
“Fundamentals driving the Irish market have nevertheless improved dramatically. The market appears undervalued today compared with long-term historical averages,” the report said.
The S&P report came on the same day that the Wall Street Journalpublished an editorial entitled The Irish Example which praised the Government for quickly introducing budget cuts to address the recession.
It said Ireland’s quick action should be a model for Spain, Portugal, Italy and Greece.
The editorial suggested Ireland’s increasing competitiveness on costs may mean the economy recovers quicker than expected.
However, S&P notes that mortgage lending continued to fall last year, despite falling interest rates contributing to a rise in affordability for buyers.
House completions are also falling, with 26,420 units completed last year compared with 51,724 a year earlier, according to Government figures. In the first quarter of the year, completions totalled 3,759 – almost half of the figure recorded a year earlier.
Continuing oversupply in the investment market means that, despite this, rents are still falling, slipping 13 per cent in the 12 months to March, following a 30 per cent decrease in 2009.
“We think the economy will likely remain unsupportive for another year at least,” S&P said.
The report said consumer caution stemming from unemployment and fiscal tightening by the Government would contribute to further house price falls, with predictions of a further 10 per cent drop over the year before they finally hit a trough in 2011.
S&P said the price slump has slowed in many European countries, including France, Italy, Spain, and the Netherlands.
The role of ratings agencies such as S&P in contributing to the global banking crisis has been questioned by authorities in the US and Europe.
