House prices were down by 9.4 per cent in the year to July, bringing them to the level they were at nearly three years ago, although the rate at which prices are dropping has slowed.
The figures were published in Bank of Ireland’s quarterly analysis of the Irish property market today.
The bank said that while there is still “significant market correction”, the pace of mortgage slowdown has eased, and while house prices are falling they are doing so at “a reduced pace” – down to 9.4 per cent from 9.7 per cent. The monthly fall in prices in July was just 0.2 per cent.
Bank of Ireland now predicts a drop in house prices of 8 per cent for the full year.
Gross new mortgage lending has fallen by 13.4 per cent in the year to the second quarter of 2008.
The number of new mortgages drawn down in the same period, however, has picked up to 35,000 from under 29,000. Bank of Ireland forecasts that mortgage lending growth will end the year at around 8 per cent and that gross lending will amount to €29 billion from €33.8 billion in 2007.
House completions fell to under 28,000 in the first half of the year and still look set to reach 50,000 “at best” compared to 78,000 in 2007.
This would be the lowest percentage addition to the housing stock since 1996, the bank said.
It said the leading indicators of housing starts imply that the first half of 2009 may be weaker still, and it forecast under 40,000 completions next year.
Bank of Ireland chief economist Dr Dan McLaughlin said: "The housing market is still in the throes of correction and it may well be 2009 before signs of stability emerge, particularly in the wake of the ECB rate rise in July.
“However, affordability has improved in the last 18 months and the ratio of house prices to income is expected to fall further to 5.8 per cent in 2009, which would take it back to the levels existing just prior to Ireland entering the European Monetary Union."