A 60% fall in house prices from their peak cannot be ruled out as analysts predict a larger-than-expected drop next year.
NCB Stockbrokers also believes that Ireland will not lose its corporate tax rate but said the country will not be able to fund itself entirely on its “own two feet” come 2014 and will require further EU assistance as a result.
The latest Reuters survey of Irish economists predicts that house prices are likely to continue falling for the foreseeable future. The poll predicts that house prices will decline by a further 11.8% in 2011 and 5.4% in 2012. However, Bloxham thinks the fall will be 12.5% this year and 7% next year.
NCB expects an overall decline in Irish residential prices of between 50% and 55%, but said a 60% decline can’t be ruled out.
Figures from the Central Statistics Office (CSO) show that property prices fell 1.5% last month against a decline of 1% in September last year. House prices are 44% lower than at their highest level in 2007.
Meanwhile, NCB has cut its growth forecast for Ireland for next year as it believes manufacturing in Europe looks “desperately weak”.
It said Ireland’s gross domestic product (GDP) will expand by 1.1% next year, down from an earlier forecast of 1.7%.
NCB also raised its growth forecast for this year to 0.5% from an earlier estimated contraction of 0.1%. It still expects Ireland to meet its IMF targets even as debt to GDP is estimated to peak at 117% in 2013.
“We had lowered GDP figures last month and had expected the economy to slow in the second half of 2011. It looks like the economy will weaken, but that the weakness will occur later than we had been anticipating,” they said.
NCB said flexibility, wage moderation and social cohesion has helped Ireland turn its current account deficit into a current account surplus and get the budget deficit heading in the right direction.
“Ireland is showing the characteristics which are required to put the economy back on the right track. These qualities differentiate Ireland from the periphery.
“However, one mustn’t forget that Ireland is recovering from the largest credit and housing bubble in OECD history,” NCB said.
They said that the Irish economic recovery has been and will continue to be two-tiered.
“Economic growth will be driven by the export sector before multiplier effects feed through into the domestic economy. This is helped by the composition of Ireland’s exports: high-value added tech and pharma products and agri products.”
NCB said that the boost from domestic demand will not be material until 2013. It also predicts that unemployment, which is currently at 14.4%, will remain above 10% until 2015.
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