Cooling economy forces AIB to cut growth forecast
A slowing housing market is one of the reasons for the cut, although the bank does expect house prices torebound over the coming months.
In its latest Irish economic update, the AIB said the economy, measured by gross domestic product (GDP), will expand 2.5% this year, 3.7% next year and 4.4% in 2010 — following a 5.5% growth in 2007.
In August, AIB forecast growth of 3.3% for this year.
“Much slower rates of growth are in prospect in 2008.
“The fundamentals of the economy remain sound, though, so growth should pick up in 2009 and 2010,” AIB economists including John Beggs said in the report.
In a separate report on housing, Ireland’s largest bank said house prices could “bottom” in the coming months and if this happens it is not anticipating a strong rebound, rather that prices will remain relatively static or, at best, increase modestly.
This view is shared by the chief executive of Irish Life and Permanent. Denis Casey, who said yesterday that Irish house prices will stabilise sooner rather than later.
“As demand softens, prices should respond and supply should reduce. And this is exactly what is happening. It means that house prices have a real prospect of stabilising sooner rather than later,” he said.
Furthermore, the Irish Property Watch website, which analyses the number of properties sold, withdrawn or for sale on the Daft.ie website, said that over the period from the January 26 to February 1 there were 667 house price drops, with the average drop at 6.1%.
Also it said the average time on the market has increased slightly since the previous week to 147 days and 42% of properties listed on Daft.ie have now been for sale for more than six months. A total of 20% have been on the market for 10 months or more.
Also yesterday, Davy Stockbrokers said Irish housing registrations dropped 55% in January to an annualised rate of 32,141.
On a three-month basis, registrations, a proxy for housing starts, fell to an annualised rate of about 38,200 from 75,100 a year earlier, Dublin-based securities firm Davy said, citing Premier Guarantee and Homebond, which register new developments.
