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House Price To Fall 60pc...

New blow for house price hopes as market set to fall 60pc from 2007 peak...

HOPES of property prices settling down have received a new blow, with a prediction that values will plunge by 60pc from the peak.

Prices have already halved, but now credit ratings agency Fitch said they are set to keep falling.

A fall of 60pc from 2007 would mean the average house price falling to €125,600 from €314,000 at the peak.

There had been some optimism in the last few weeks that prices could be reaching a floor, particularly in Dublin.

But the latest official figures show that property prices fell in June, dashing hopes that the market was close to stabilising.

The fall of 1.1pc in prices in June recorded by the Central Statistics Office reversed a rise that was recorded in the previous month.

Prices have halved from the peak of the market almost five years ago.

The CSO figures indicate that the average home is now priced at €156,000, having collapsed to half of its value since the boom that came apart at the start of 2007.

This country has suffered one of the worst house price collapses in the western world.

And the figures for a fall of 50pc in house prices are an average -- rural parts of the country are seeing very few transactions with little demand for houses, while family-type homes in parts of Dublin with good services are reported to be selling.

Fitch also said yesterday it expected arrears to keep rising this year, and it has now forecast that 20pc of the value of mortgages will end up defaulting.

Accounts

If house prices stop falling it may help arrest the rise in arrears, experts said.

The higher the level of the negative equity, the more arrears will rise, mortgage expert Karl Deeter explained. Fitch bases its figures on baskets of mortgage accounts that have been packaged together and sold on.

These mortgages are still serviced by the originating banks, but the packages of mortgages are "rated" or assessed by agencies like Fitch.

Fitch had previously expected 15pc of the value of residential mortgages to end up in arrears.

Central Bank figures indicate that 116,000 mortgage accounts are either three months or more in arrears or the mortgage holders have had to have the repayments on their mortgages lowered.

Fitch analyst Michael Greaney noted yesterday that there has been a sharp rise in arrears.

"More importantly, the delay in economic recovery, the austere fiscal consolidation and falling house prices mean the speed at which arrears are increasing is unlikely to slow in the near future," he said in a report.

State initiatives, including the planned personal insolvency law and various mortgage forbearance policies, will influence arrears performance and house prices over the next several years, the analyst said.

Report by Charlie Weston - Irish Independent

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