Skip to main content

House Prices Could Fall 67%...

House prices ‘could fall by 67% from peak’...

INTERNATIONAL credit ratings agency, Fitch Ratings has warned of "further downside risks" to Irish house prices; adding that prices could ultimately fall by 67% from peak levels in a worst-case scenario.

In a new report on the Irish housing market, Fitch said it realistically expects prices to show a total drop of 50% from their peak around four years ago. However, it added that while that rate of decline forms "the most likely scenario", a worst-case scenario would result in a full-term 67% drop in house prices.

"Irish house prices continued declining during 2010 and now are approximately 42% below the peak.

"In light of the oversupply of properties and continued restricted credit availability, the agency sees further downside risks to Irish house prices and as a result, Fitch now expects a peak-to-trough house price decline of approximately 50% as the most likely scenario," said Ketan Thaker, senior director in Fitch’s European Structured Finance team. Fitch said it has pushed an expected rebound back to next year.

"Interest rates are also expected to rise before a full economic recovery, which would result in affordability stress for the majority of borrowers in the Irish market," it warned further.

Fitch is also warning of a potential increase in "foreclosure frequency" — or house repossessions — here, reflecting "the deterioration of the Irish economy and the heightened sovereign risk and its impact on mortgage performance."

"The Irish economy has experienced unprecedented stress, which has knocked 12% off real GDP over a three-year period and increased the unemployment rate by 9% over the same time. Combined with a sharp house price correction, Fitch’s revision to its Irish mortgage-loss criteria reflects the stress in the Irish economy," said the agency’s Michael Greaney.

"Almost all the mortgage debt in the Irish market either starts off floating or becomes floating-rate during the term of the mortgage. The low interest rate environment, over the past two years, has significantly reduced the debt service burden for many borrowers. With the ECB recently starting to raise interest rates, these borrowers are likely to be exposed to higher debt service burdens," the report added.

Property agency Savills said it broadly agreed with the Fitch forecasts.

"The pace of price falls totally depend on locations, however," according to Joan Henry, head of research at Savills Ireland.

"In prime locations, house prices are showing signs of bottoming out at between 50% and 55% from their peak. But in commuter areas, where there may be an oversupply of housing, prices are likely to bottom out at between 60% and 67% below peak.

"There’ll still be demand problems in areas of oversupply," she added.

Report by Geoff Percival - Irish Examiner

Popular posts from this blog

Property Crash Homes For Sale...

Hundreds of repossessed homes in Ireland to be sold by auction... UK property consultancy Allsop to hold auction in April at Dublin's Shelbourne hotel: Flats in Ireland that could have fetched €150,000 in the Celtic Tiger years are to be put on the market for as little as €25,000 (£21,000) in the country's first ever mass auction of repossessed homes. And, in a sign of how wide the property crash is, the latest item to turn up in liquidation sales in Dublin is a job lot of 15 cranes, including a pair towering over Anglo Irish Bank's half-built headquarters in the city's docklands. "Tower cranes were among the most sought-after heavy plant and machinery 10 years ago," Ricky Wilson of Wilsons Auctions says. "You couldn't buy them quick enough. Now they are left idle for two or three years on sites." He has 15 cranes worth €500,000 going on sale on 26 March, with German, Dutch and Polish buyers expressing interest. But it is the auction ...

Property Ireland - Irish Land Values Go Up Like A Rocket & Fall Like A Stone...

Land values go up like a rocket and fall like a stone... SITE EVALUATION: Why would a developer bid €225,000 an acre in 1999 and €2.8m an acre in 2007? Bill Nowlan explains WHY HAS THE value of development land fallen so precipitously, by over 50 per cent in the past 12 months, when residential and other property values have only fallen by 25 per cent or 30 per cent? There is an old property cliché which says that "land values go up like a rocket and fall like a stone" and this seems to have been bourne out in Ireland over recent years. Why does this happen? To answer this question requires an insight into the way developers prepare their bids for development land and I set out below a glimpse into that process. Let me start by looking at how a developer in normal times estimates his bid for a plot of land with planning permission, which in estate agents' parlance is ready-to-go. The key starting point in a developers equations is the expected sale price of the finished b...

Ireland's Celtic Tiger Excesses...

'Bang twins' may never get to run a business again... POST-boom Ireland is awash with cautionary tales of Celtic Tiger excesses, as a rattle around the carcasses of fallen property developers and entrepreneurs will show. Few can compete with the so-called Bang twins for youth, glamour and tasteful extravagance. Simon and Christian Stokes, the 35-year-old identical twins behind Bang Cafe and exclusive private members club, Residence, saw their entire business go bust with debts of €9m, €3m of which is owed to the tax man. The debt may be in the ha'penny place compared with the eye-watering billions owed by some of their former customers. But their fall has been arguably steeper and more damning than some of the country's richest tycoons. Last week, further humiliation was heaped on them with revelations that even as their businesses were going under, the twins spent €146,000 of company money in 18 months on designer shopping sprees, five star holidays and sumptu...