Fitch – the ratings agency – says it expects Irish house prices to drop by a further 20% from current levels. They forecast a 10% fall in 2013 nationally.
In its latest residential mortgage briefing it said …
“Fitch expects house price weakness in most countries, albeit to different degrees. The group with the most pessimistic outlook on house prices — for which Fitch assumes further declines between 15-20% in its base case scenario from H112 to trough — includes the two countries with the largest property overhangs – Ireland and Spain.”
The report also commented on the Irish property market – saying that “the consequences of the property market boom may not have not fully played out yet. While there is evidence to suggest that the supply/demand imbalance in housing is starting to even out in urban areas, overall vacancy rates remain high. This imbalance will continue to act as a negative drag on house prices and construction activity, particularly in more rural areas, which are expected to suffer from severe oversupply in the longer term .”
Fitch also mentioned that a mitigating factor for Ireland is the significantly improved affordability of new mortgage loans. The combination of lower house prices and relatively low interest rates strongly outweigh the effect of decreased incomes.
Figures from the end of 2012 seemed to show price increases in some areas – but these could have been caused by people rushing to beat the removal of mortgage tax relief . In 2013 we could see more price falls – especially outside Dublin.