House prices still falling, but more slowly

HOUSE prices nationally are continuing to fall but less dramatically than in previous months.

The latest house price index, compiled by Permanent TSB and the Economic and Social Research Institute, shows a fall of 0.7% in March, bringing the overall reduction for the first three months of this year to 2.2%.

That compares with a reduction of 3.9% for the last three months of 2007 and is an indication, according to Permanent TSB, of an easing in the rate of the slump. However, it still means homes lost 8.9% of their market value in the 12 months to the end of March — meaning a house or apartment that was worth €300,000 in March 2007 would since have lost €26,700 in value.

Hardest hit were homes outside Dublin, which fell in value on average by 0.6% in March and 2.8% in the first three months of the year compared with homes in Dublin, which lost 0.2% of their value in March and 1.8% in the first quarter. That’s a reversal of the trend begun last year when prices in Dublin fell faster than in the rest of the country.

Least affected were three-bedroom semi-detached houses which bucked the trend by increasing in value marginally, with prices rising by 0.2% in March and falling 1.1% over the first three months of the year. Over the past year, three-bed semis have proved the most reliable buy, falling in value by 4.4% compared with the overall national slump of 8.9%.

New homes lost less of their value than existing homes, new properties falling in price during March by 0.5% compared with 0.7% for existing stock. This would seem to contradict the anecdotal evidence that developers are slashing prices to shift new stock, but Niall O’Grady of Permanent TSB said the effect of recent price cuts would probably be reflected in the coming months.

“Developers were very slow at the beginning to actually put the price down so you still paid €250,000 for a home but you got a free car or €20,000 worth of kitchen appliances with it. They went the promotional route rather than the price reduction route. Now they seem to realise this is not about gimmicks but about lower prices, so more than likely the reductions will be more noticeable from now on.”

Mr O’Grady said it was difficult to predict trends for the latter part of this year but he said it was most likely that prices would continue to fall in the short term.

“We don’t see any significant signs of the market recovering in April or May,” he said.

However, he added: “In quarter four [October, November and December] of last year, the reductions were about as significant as we expect to see and we don’t expect to go back to that level.”

Deirdre Ryan, economist with Goodbody Stockbrokers, said: “We expect house prices to be down by 7% by year end.”


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