‘No recovery’ in house price values

HOUSE prices will not recover until mortgage lending increases and until buyers regain confidence in job stability, according to one leading economist.

Bank of Ireland chief economist Dr Dan McLaughlin says that Irish commercial property prices may be picking up. However, despite a pick-up also in US and British markets, he offers no immediate signs of hope for Irish house values.

Dr McLaughlin said: “The commercial property market in Ireland may have reached a turning point; the IPD showed a marginal positive return in the first quarter, the first in two years.

“Capital values fell again in the quarter, it has to be said, by 1.8%, bringing the decline from the peak to over 56%, but the trend implies that capital values may have stopped falling in the current quarter.

“We have seen a sharp recovery in the UK residential and commercial property markets, but the UK is a very different market to Ireland. There is no real evidence that the UK built an excess supply of houses in recent years. Quite the opposite, in fact, many in the UK argue that they never build enough.

“In Ireland, there is an excess supply of houses. Ireland also has a lot of uncertainty about employment. The economic numbers for Ireland have improved and will help, but we would also like to see a rise in mortgage lending before talking about a recovery.”

In Bank of Ireland’s latest monthly bulletin, issued yesterday, Dr McLaughlin says Ireland should not read too much into any reports pointing at a global property market recovery.

The permanent-tsb/ESRI index recorded a 4.8% fall in the first three months of 2010, while the Daft.ie measure of asking prices noted a 3.8% fall. The CSO figures on private sector rents also show further declines in the first quarter, albeit at a much slower pace.

Dr McLaughlin said: “The UK is an exception in Europe, with clear evidence that an upturn is under way. Residential house prices bottomed in the first quarter of 2009 according to the Nationwide index, having fallen by 19% from the peak, and have risen by over 11% since then because demand has stabilised against a backdrop of limited supply.”

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