Commuter belt house values drop a fifth in a year

THE decline in house prices is accelerating, with homes in the Dublin commuter belt losing a fifth of their value over the past 12 months.

Nationally, house prices fell on average 9.1% during 2008, with the biggest decreases in Dublin (11.7%) and surrounding counties Wicklow, Kildare, Louth and Meath at 16.8%. When inflation is taken into account the real national decline is more than 13%.

The findings were released yesterday by Permanent TSB and the Economic and Social Research Institute (ESRI). Based on the actual amount houses were sold for rather than asking prices, the review provides the clearest picture yet of the property market crisis.

The average national house price is €261,573 compared with €287,887 in 2007 — and values are expected to decline by at least another 10% this year.

Worryingly, December 2008 saw prices decline in the Dublin commuter counties of Wicklow, Kildare, Louth and Meath by a record 4.5% in that month alone.

Permanent TSB’s Niall O’Grady said: “Realistically prices are back at where they were in the middle of 2005.

“Places where the increase in prices was most dramatic are seeing the most dramatic decreases. Taking into account inflation the real decreases in price over the last two years is close to 25%.

“Confidence is at the heart of this, until that comes back we don’t see any significant chance of a recovery.”

The report outlined wide geographical variations. The midlands and mid-west saw the smallest decline of 5.2% and 6.2% respectively.

Declines in the southern region have also been more modest, with the south-east seeing house prices falling by 6.2% and the south-west by 9.6% between late 2007 and late 2008.

However, the market collapse is relatively good news for first-time buyers.

Mr O’Grady said it was now a “buyers’ market” with first-time buyers holding out and on average buying houses for 14% less than in 2007.

Permanent TSB has halted 100% mortgage provision. However, one other lender is continuing to promote these loans to people employed in professional occupations.

Mortgage applications across the market are estimated to have fallen by nearly 40% — resulting in 16% of housing stock lying vacant.

In 2007 this figure stood at 13% but the rise is significant due to the amount of second homes included.

Next year only 25,000 house completions are expected compared with the 93,000 during the height of the boom in 2006.

The ESRI’s David Duffy said he did not expect a property tax would have much of an adverse impact.

“People’s expectations are the main driver. At the moment they are most concerned about the long-term outlook,” he said.

Mr Duffy said the biggest impact on house prices are rising unemployment, emigration and rock-bottom confidence.

The ESRI estimates unemployment will reach 10% during 2009.