House prices may not recover for 10 years

House prices have continued to fall amid warnings that it could be a decade or more before prices recover.

Figures from the Sherry FitzGerald index, published yesterday, show that while house prices fell by 3.4% nationwide in the last quarter, they were down 4.4% in Cork.

Prices in Dublin fell by 3% in the same period. House prices in the capital have plummeted 65.8% in real terms since the peak boom levels in 2006.

In effect, house prices in Dublin are now the same level as they were at the start of 2000.

Nationally, the fall in house prices is of a similar magnitude, down 61.4% compared with 2006 prices.

First-time buyers continue to seek a way into the market, accounting for 29% of properties traded in the first quarter, though this is down from 45% in the corresponding period of 2011.

Cash buyers bought 36% of all properties and investors 11%.

An analysis of available stock showed 51,400 units across the country, with 6,700 in Dublin City and county — a fall in both categories on last year.

The chief economist with Sherry FitzGerald, Marian Finnegan, said: “While prices continued to fall, the pace of deflation was more moderate overall than both the previous quarter and comparable period in 2011.

“All in all, the dynamic of the market appears to be changing.

“This is particularly evident through the increase in cash purchases and the notable increase in investor activity. That said, it is too early to suggest this is a definitive trend.”

Ciaran Phelan, chief executive of the Irish Brokers Association, said new initiatives on mortgages announ-ced by lending institutions would need to result in mortgage volumes hitting €5bn this year to prove effective.

He said: “If the banks are committed to returning to the mortgage market, this figure would need to exceed €5bn in 2012, rising to €10bn in the next two to three years.

“While property prices continue to fall, the more recent falls are largely attributable to the dearth of credit rather than borrowers’ affordability, so the restoration of the former should help to put a floor under this market.

“However, the decision by a number of the major banks to facilitate the transfer of negativity from one property to another should be welcomed, as is the case with Ulster Bank’s new tracker transfer product.

“It’s good to see the banks finally getting off the fence and engaging with the new reality; that property prices may not recover for a decade or more.”


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