House prices will keep falling this year despite growth...
HOUSE prices will continue to fall this year despite a return to economic growth, the Government has warned.
And a report from the Department of the Environment warns that almost 200,000 homeowners are facing negative equity by the end of the year -- where one-in-four mortgage holders will be forced to pay off loans that exceed the value of their homes.
The Housing Market Overview 2009 also says price recovery will take longer outside major urban centres, and that the downturn may be "longer or more severe" than expected.
This means that demolition could be the only option for the thousands of housing units due to come under the control of NAMA because they are unlikely to ever sell.
Officials from the department have begun a count of the number of unsold housing units across the country, with some estimates saying up to 300,000 may be empty.
"The International Monetary Fund has analysed house-price cycles across 19 countries, including Ireland, and has shown that the average upturn lasts about 6.5 years and the average downturn lasts about 4.25 years," the report said.
"However, as the most recent period of sustained house-price growth was atypically long (almost 16 years), it is possible that the current downturn may also be longer or more severe than normal.
"Notwithstanding the emerging signs of stabilisation in the public finances, a return to moderate economic growth in some areas of the eurozone and beyond, and the significant improvement in affordability resulting from price adjustment, the consensus is that prices are likely to soften further in the period ahead in certain areas."
Some 792,000 homeowners have residential mortgages, and the report said 116,000 borrowers were in negative equity at the end of 2009. This figure could rise to 196,000 by the end of the year, with first-time buyers -- many of whom bought at the height of the boom with 100pc mortgages -- "more susceptible".
The Department of the Environment said the "consensus" was that prices would continue to fall in certain areas.
"It is a consensus based on information from a number of informed sources," a spokesman said.
"When the department has compiled its database on unfinished and ghost estates the information will enhance our knowledge base in relation to the current state of the market and possible future trends."
Meanwhile, the latest house price figures from property site Daft.ie, published yesterday, show that nationally the average price paid for a home is now €224,000, a 36pc drop from the €352,500 paid at the height of the market in 2007.
The drop has been more severe in the capital, where a home now costs an average of €272,500, down 40pc from the €457,000 paid just three years ago.
Agencies compile an index of house prices using different criteria. The department bases its prices on the value of mortgages drawn down, while Daft.ie bases its index on the asking price of properties on its website.
This means that nationally -- depending on the survey used -- the decline ranges between 27pc and 37pc, while in Dublin the drops are between 33pc and 46pc.
The report adds that future demand will depend on "demographic trends, economic performance and the level of available stock".
"The uneven distribution of the overhang of unsold properties means there will be a number of discrete housing markets in Ireland rather than a single market. Recovery of demand in the Dublin area is likely to be ahead of other areas," it said.
The managing director of estate agents Hooke & MacDonald, Ken MacDonald, told the Irish Independent that prices had fallen by as much as 50pc in some parts of Dublin, and that the recovery could take up to three years outside the major urban centres.
"Certainly Dublin will recover much quicker than a lot of areas. In a lot of provincial areas it will be two or three years before they really stabilise because of the stock of properties available in those areas," he said.
Report by Paul Melia - Irish Independent.