Fall in house prices second-highest in EU

Irish house prices fell at the second-fastest rate in the European Union last year and at a rate that was almost five times faster than the EU average, according to data compiled by academics based at the National University of Ireland in Maynooth (NUIM).

The figures published by the university’s All-Island Research Observatory show that Irish property prices are now nearly 30 per cent below a standardised average dating back to the middle of 2010.

They indicate that the Republic has had the worst-performing property market in the EU over the last six years, although markets in Spain and Bulgaria have performed almost as badly in recent years.

The data does contain some glimmers of hope that a recovery may be in sight or at least that the worst of the price falls are over.

The figures, compiled from Eurostat price surveys, show the Republic reporting the third-highest quarterly property increases in the third quarter of last year with prices going up by 1.6 per cent over a three-month period.

Precipitous declines

Eurostat compares housing sectors across all 27 EU countries and while the Republic has been among the worst performing markets over the last six years, it has recorded even more precipitous declines in Estonia and Latvia, although in both countries prices subsequently recovered.

Irish prices have yet to stage a similar recovery.

The Eurostat House Price Index shows prices across the EU declining by 1.9 per cent last year when compared with the same quarter of 2011.

The highest annual price increases last year were in Estonia where prices went up by 8.4 per cent.

Luxembourg saw increases of 7.1 per cent while prices in Finland went up by 2.1 per cent.

The largest decline last year was in Spain, where prices fell 15.2 per cent year-on-year.

Prices in the Republic were down 9.6 per cent in the 12 months to the end of last September and the cost of a property in the Netherlands was down 8.7 per cent over the same period.

The EU House Price Index sets the base price of property in each country at 100 points at a date in the middle of 2010 and lays bare the scale of the collapse in the Republic.

At the beginning of 2007, Irish prices stood at 151 points on the standardised scale but fell back to 76.5 last year.

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'Perfect Storm'

“The scale of the price collapse in Ireland is as a result of a perfect storm of a banking and economic crisis coinciding with a dramatic oversupply across the market,” said Prof Rob Kitchin of NUIM.

“We have recorded declines in other countries and while some, like Spain, have mirrored the Irish experience, most countries, where over supply was not a problem, have seen price falls which are more modest.” He said few positives could be drawn from the figures from an Irish context.

“Looking at the data, you could say the declines have levelled off and are even marginally on the increase, but the increases are primarily being driven by sectors of the Dublin market where there is not an oversupply.”

Prof Rob Kitchin said that family homes in urban centres are in relatively short supply and high prices in this category was pulling up averages elsewhere.

“There is no question that there is a shortage of good family homes so there will be a recovery there first, but elsewhere an oversupply will keep the market depressed for a very long time.”