The property market is close to stabilising following five years of price falls which has seen a peak-to-trough adjustment of 50%, according to the ratings agency Standard & Poor’s.
S&P is forecasting a nominal house price increase of 1% in 2014 and 2% in 2015.
“We believe the Irish property market will continue to stabilise next year before picking up slightly in 2015. Anecdotal evidence suggests that some urban regions, especially in Dublin, are already experiencing some stock shortages.
“Continued economic recovery in 2014 and 2015 should also support demand for housing. We expect real GDP to gain 1.9% next year and 2.4% in 2015, while unemployment should slowly decline to 13.1% in 2015 from 14.7% in 2012.
“Fundamental indicators such as price-to-income and price-to-rent ratios are hovering around their long-term averages, which also supports our view that prices have reached a floor and are stabilising.”
The collapse of the property market wreaked havoc across the banking system in 2008, which eventually forced the Government into an EU/IMF bailout in Nov 2010. Ireland is to exit the programme next month.
A recovery in house prices is seen a precondition for an improvement in consumer sentiment and the domestic economy.
The recovery of the banking system hinges on solving the mortgage arrears crisis. “The latest data on mortgage arrears, repossessions, and loan restructures for the quarter ended Jun 2013 show that 12.7% of private residential mortgage accounts for principal dwellings were over 90 days in arrears, up from 12.3% in Mar 2013.
“Arrears on buy-to-let properties were even higher, at 20.4%. The Central Bank of Ireland’s revised code of conduct for mortgage arrears among other measures should make it easier for banks to repossess homes and provides incentives for banks to resolve troubled mortgages more quickly.”
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