Buyers less fearful of price crash

CONSUMERS are less fearful of a crash in the property market and are expecting house prices to grow modestly this year.

According to a new survey from IIB Bank and the ESRI, the majority of Irish consumers are expecting house prices to grow by about 5.5% this year compared to the actual growth rate of 13.4%.

A previous survey IIB/ESRI last autumn found that most people expected prices to rise by 4.5% and a good number of them were expecting prices to fall. The number of consumers expecting prices to "decline a lot" fell from 2% of those surveyed to just 0.6%, while those expecting modest rises increased from 41.4% to 48.6%.

Austin Hughes, chief economist with IIB Bank, said the survey shows that many people have accepted that the days of huge jumps in house prices was over and that many people now see a soft landing for the housing market.

The increase in the number of consumers expecting just modest price inflation reflects a belief that the housing market will not see a crash, Mr Hughes said. The survey also found that the number of people expecting prices to grow by more than 15% declined.

Mr Hughes added that the threat of a collapse in house prices that had been predicted by some commentators last year and reiterated by the Economist magazine which last week again warned that Irish house prices could fall by 20% have faded and that there were fundamental economic reasons to believe that prices would continue to see modest growth.

He said the general economy has improved since last year and warnings of a large increase in unemployment had not proved true, while other factors such as low interest rates and a young population meant there was still strong demand for houses, which would keep prices growing.

On the issue of whether borrowers were piling up debt to get onto the housing ladder, Mr Hughes said there was no real evidence to back this up and that loan-to-value rations were still comfortable.