House Prices in Ireland - What's the Outlook for 2008?

January 3rd 2008:

There has been a lot of talk about the property market ‘softening’ in 2007.

And indeed, the figures speak for themselves. According to the Permanent TSB / ESRI House Price Index:

• House prices went down by 5.9%
• Second hand homes dropped by 8.8%
• New homes prices dropped by 3.6%
  in the 12 months between November 2006 and November 2007.
  
• Sherry Fitz report a drop of 6.8% for the year.
  

So what's the forcast for 2008?

We'll give you our own opinion about what will happen to prices this year (and why we think prices have already dropped more than reported) but first here's what some property market pundits expect:

EBS Building Society (Dara Deering, Director of Membership):

"House prices will continue to ease back probably in the order of 5 per cent on average in 2008 and some areas may be impacted more than others".

Davy's Stockbroker - 6 per cent

Sherry Fitzgerald (Marian Finnegan, chief economist, Sherry FitzGerald Group).

Describing 2007 as a "challenging" year, Ms Finnegan said the outlook for 2008 was brighter, but that she did not expect prices to revive immediately

AIB's economist:

Predicting house prices will record drops of as much as 6pc in the first few months of 2008.

Goodbody's Stockbroker - 8 per cent

CB Richard Ellis (Chief Economist, Marie Hunt)

Last year should see about 15pc wiped-off property values across the board, according to CBRE's research. "You won't see anything like that in 2008, there will probably be zero percent growth," Ms Hunt said.

"We haven't seen all of the falls, some of the premium second-hand stock could still fall about 5pc, but overall the expectation is for things to pick up in the second half of the year.

"The current inducements on new homes are probably as good as it gets, you might not be able to get as good value in the second half of the year."

Douglas Newman Good (Chief Economist, Paul Murgatroyd)

Paul expects no overall change in house prices this year. "This may be the case in every quarter, or it may be through a levelling out of the odd percentage gain or loss". He has ear marked Easter as the turning point people have been waiting for. "Prices will be reasonably slack early in the year. But by the end of March I expect we'll be past the bottoming out of house prices".

And here's what we think: Moving.ie (Editor, Declan Clare)

We feel that the reported drop in house prices underestimates the actual extent of the price falls on the ground.

While coverage of the Permanent TSB and Sherry Fitz figures indicate a drop in prices in 2007 of about 6 - 7%, we believe that the actual figure is closer to 15%. There are two main reasons why the drop is bigger than the figures suggest:

• The figures only take account of houses that have actually sold.
  They don’t take account of the ones that are still on the market because the sellers can’t find buyers.
  
  
• Permanent TSB's figures are based on mortgage completions, rather than when the property sale is agreed, so the figures issued today, reflect the sales prices as they were about 5 - 6 months ago. Ask any estate agent, and they'll tell you that the market was much stronger 6 months ago than it is today.
  
  (We suggest a time lag of 5 - 6 months as it usually takes about a month from the time a house purchase is agreed until contracts are signed. Then it usually takes a further 2 - 3 months to complete the purchase of the property. It's another 2 months or so before the House Price Index is released, so by the time the report comes out, the property price figures are about 5 - 6 months out of date).
  

We'll see todays figures reflected in about 6 months time.

What should you do next?

• I don't think there's any need to rush into a purchase, but it's important to get in a position where you can move quickly, if you find a bargain.
  
  
• We've always been a big believer in arranging mortgage approval in principle. Now, it's even more important, as it will put you in a very strong position when you are looking to buy.
  
  
• Find out why we think it's so important, or arrange approval in principle now.

 

Related Articles:

House Prices in Ireland: Property Market Reports
Find all the latest property market reports from the leading property firms, such as the Permanent TSB House Price Index, AIB Housing Market Monthly Bulletin, Daft Reports, and Sherry Fitz House Price Index.