Downward spiral to continue with house prices set to drop further 15%

House prices are expected to fall by a further 15% this year, following on from last year’s near 13% drop.

New monthly figures from the CSO show that residential property prices fell by 16.4% — on a year-on-year basis — in April. This was largely unchanged on the 16.3% year-on-year fall measured in March; but was significantly ahead of the 12.2% annualised price fall evident in April of last year. On a rolling monthly basis, April saw a 1.1% fall compared with March.

Closer scrutiny of the latest CSO data shows that house prices in the Dublin area actually rose by 0.5% in the month; but were down by over 17% on a year-on-year basis. In the rest of the country, as a whole, the average house price fell by 2% on a monthly basis and just 1.3% year-on-year.

Reaction to the latest price movement was mixed. Alan McQuaid — chief economist with Bloxham Stockbrokers — said that no significant improvement in the housing market can be expected until the employment situation improves and mortgage lending patterns normalise.

He added: “A lot has been written recently about houses now being affordable again, but in our view that is irrelevant if you have an unemployment rate of over 14% and no real signs of it improving. Following the drop of almost 13% in house prices in 2011, we are now looking for another double-digit decline in 2012. We are currently projecting an average fall in house prices of 15% this year, which is a bit higher than the median 12% forecast.”

Meanwhile, Davy Stockbrokers called for the introduction of a national house price register and claimed the CSO figures were unreliable.

“The increasing prevalence of cash purchases in the market — evidenced by the recent success of property auctions — means that the CSO index is becoming a less reliable indicator of price movements,” said Davy analyst David McNamara. “The introduction of the long-mooted national house price register would provide much-needed visibility on current prices.”