House prices expected to drop by 40%

MORE than €120,000 will be wiped from the value of the average Irish house by the time the market bottoms out.

Goodbody Stockbrokers expects prices to plunge by 40% from their February 2007 peak when the average house price was €311,078.

This news comes as figures from the Department of the Environment show the number of mortgages approved by banks and building societies last year was more than half what was approved in 2005.

The figures show 55,879 mortgages were approved in 2008 compared with 120,037 in 2005, 114,593 in 2006 and 88,747 in 2007.

Director of the Institute of Professional Auctioneers and Valuers Rachel Doyle said the top three reasons preventing people from buying houses were non-availability of finance, expectations that prices will fall further and a lack of job security.

“In the course of just a year the banks have gone from one extreme to the other.

“Normal lending must be restored to the marketplace and that requires more urgent intervention by the Government,” she said.

The government figures also show new house registrations for the first quarter of this year fell by 73% compared with the same period last year.

There were 1,166 new house registrations in the first three months of the year compared with 4,331 for the same period last year. There has been a 45% drop in new house completions in the first quarter on last year’s figure.

The latest permanent tsb/ESRI house price index released this week showed prices fell 1.9% in April – the sharpest fall on record.

Goodbody chief economist Dermot O’Leary said if this rate of decline were to continue for the rest of the year, then by December the index would be down by 31% from their peak.