Friday, May 30, 2008

Irish Housing Market decline continues

Irish house prices fell by 9.2% on the year in April, compared with a 8.9% decline in March, according to the independent think tank Economic & Social Research Institute (ESRI), and Permanent TSB bank. The average price paid for a new house in April 2008 was EUR 280,981, while that paid for a second hand house was EUR 278,987. The equivalent levels in December 2007 were EUR 290,296 and EUR 284,608. The full story appears here

  • The 2% rise in Euro interest rates has has taken the fizz out of the market.
  • The failure to radically reform Stamp Duty is a further drag on the market.
  • According to figures provided to Fine Gael by the Department of Social and Family Affairs, people under 35 now make up more than half (52.9%) of the total number of people who were added to the Live Register in the past year. The figures also show that there are now 97,071 people under the age of 35 who are on the live register, the highest figure recorded since records were fully computerised in 2003 and that the number of people in the 20 to 34 age group who are unemployed has increased by 45% in the past twelve months.

  • Almost 220,000 houses and apartments are lying vacant across Ireland
    New housing starts are expected to drop to 45,000 as confidence has ebbed away. Indeed this figure may be optimistic.

  • House price inflation skyrocketed in recent years. Houses have been priced out of the reach of large segments of the middle class. The salaries of teachers, guards and nurses are insufficient to purchase houses.

The correction in the market has not completed its course. There is evidence that many potential house purchasers are holding off confident in the expectation that a further sizeable reduction is in store. Indeed with EU inflation rising to 3.6% -up from 3.3% it appears unlikely that the ECB will reduce interest rates in 2008.
2008 is developing into the annus horribilis for the Irish property market.

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