Homeowners left reeling as 30pc price fall predicted...
HOME owners are reeling from a double-whammy of bad news, after both an international broker and one of Ireland's leading economists warned house prices could plummet even further over the coming months.
In a statement announcing the predictions, international broker Credit Suisse said that Ireland's property market is continuing to tumble, with house prices potentially falling by another 30pc over the coming months.
The internationally-respected firm has made the comments because it says the market is only reacting to the credit crunch now.
The upshot is that the impact of the credit crunch has yet to filter through to the Irish housing market, with any weakness already experienced down to a drop in demand rather than tighter credit.
"As a result, we see mortgage affordability decreasing and house price declines accelerating. What is more, the housing market has been underpinned by strong immigration and rental demand, but it now seems likely that immigration trends will reverse and landlords may start to sell," the international broker warned.
As a result of the situation, Credit Suisse says that house prices could now be slashed by a third or more, a claim the broker says is supported by the International Monetary Fund.
"Housing completions are running at an annualised 50,000-55,000 units, but we think a further slowdown in the housing market could trigger a more pronounced contraction in the residential construction industry," it said.
For the banks, the broker said that such a fall in house prices would result in a big jump in arrears, which could rise fourfold, leading to a substantial 40pc increase in "mortgage impairment" or bad debts.
The dire forecast is contained in a review of the outlook for the big banks, with the negative reaction plainly visible in the 6pc fall endured on the market by Bank of Ireland and AIB.
And it comes on the back of yesterday's comments by leading Irish economist Jim Power that homeowners could see up to €140,000 wiped off the value of their properties -- with prices expected to fall 45pc from their peak.
Jim Power, chief economist with financial services firm Friends First, said house prices are already down about 25pc from their February 2007 peak.
Report by Caroline Crawford at herald.ie