Ireland is bottom of the league of 20 countries in The Economist's latest global house price index. Frances O'Rourkereports
IRISH house prices are overvalued by nearly 16 per cent according to The Economist, even though they fell by 11 per cent over 2009 in the quarter under review. Its figure of 15.7 per cent is based on its analysis of "fair value" in housing: it compares the current ratio of house prices to rents with its long-term average.
Ireland is at the bottom of the league of 20 countries in the magazine's latest global house price index, with the largest fall in house prices. The Economistwarned of the dangers of the Irish property bubble seven years ago.
The index shows that in the 13 years between 1997 and 2010, Irish house prices jumped by 187 per cent. Only South Africa (with a 456 per cent rise in the same period) and Australia (with 211 per cent) top that figure.
British house prices rose by a similar amount to Ireland’s – 185 per cent – in the same 13 years. Its prices in the last year rose by 8.7 per cent. Australian property is currently the most overvalued of any of the 20 countries analysed: house prices there rose by 20 per cent in the year to the end of the first quarter of 2010 and are overvalued by 61 per cent, says the magazine. “A frothy property market” was one of the reasons for the Reserve Bank of Australia raising interest rates six times between October and May; it kept rates on hold in June, however, saying there were signs that buoyancy in the housing market was easing.
Asking prices for residential property around Ireland fell by 4.2 per cent in the second quarter of 2010 according to property website Daft.ie’s report this week, and by 3.4 per cent according to MyHome.ie’s report last week. This suggests that vendors are still overvaluing their homes.
Slowing property markets down is not a simple matter, the magazine suggests, reporting that house price inflation has accelerated in several Asian countries which took measures to cool their property bubbles.
House prices in Singapore rose by 40 per cent in the quarter under review, despite tighter down payment requirements and stamp duties on properties sold within a year of purchase.
China – where house prices rose by 12.4 per cent over the year, peaking in April – introduced similar property-cooling measures, and prices have moderated a little.
The situation in the US is a little more complicated, with several different indices, but all indications are that there is a renewed housing slowdown, says The Economist. The national index fell during the three months to the end of March.
