House prices have, to date, fallen 50% from the peak of the boom.
Fitch predicts falls in house prices in all the troubled peripheral eurozone countries. It also anticipates depressed mortgage lending and pressure on incomes and consumer confidence — but in a glimmer of hope for homeowners it said it was conceivable that Irish prices could stabilise.
“The agency expects house prices to decline by an additional 13% in Italy and Portugal, 15% in Spain and Greece, and 20% in Ireland. Different from Fitch house price forecasts for most countries, the house price assumption for Ireland is a conservative estimate reflecting various downside risks in the market. It is, however, also conceivable that Irish prices stabilise sooner and at a higher level than Fitch’s base case assumption suggests,” it said.
It said Ireland has yet to work out the full consequences of the boom to bust cycle of the past 10 years, with supply/demand evening out in urban areas though overall vacancy rates were high.
“This imbalance will continue to act as a negative drag on house prices and construction activity, particularly in more rural areas, which are expected to suffer from severe oversupply in the longer term.”
A single bright spot was affordability. It pointed to a combination of low interest rates and collapse in property prices which have resulted in affordable homes for first-time buyers, though mortgage supply remained constrained.
However, Karl Deeter of Irish Mortgage Brokers said Fitch was talking nationally and not looking at the factors on the ground.
“In Dublin, the stock of available houses has fallen to 1% when in a normal city it is 3% or 4%. Does the oversupply in Leitrim outweigh what is available in Dublin by enough to push prices down by 20%? I don’t think it’s realistic.”
Mr Deeter said Fitch had made a lemming call looking at the trajectory of the market instead of the facts on the ground.