Predictions not too far off the wall
Q: Who is right about the property market – Fitch or the Irish optimists?
Just when people were starting to think it was safe to get back into the property market, a ratings agency came along and warning of more dire price falls.
There has been much talk of recovery in recent months but Fitch said this week that there is still plenty of scope for pessimism with property prices set to fall by as much as 20 per cent over the next three years.
While its Global Market Outlook for Housing and Mortgage Lending report concedes that “signs of stabilisation are taking hold”, market fundamentals “still point to limited improvement in house prices in the near term which leads it to “cautiously . . . assume a further house price correction”.
Restricted access to mortgage lending will continue to impede recovery, Fitch says, while an increased level of repossessions and the impact of personal insolvency legislation, which comes into force this spring, will depress prices further.
Fitch has been wrong in the past but this week’s predictions are not off the wall, even if prices appear to have stabilised.
Earlier this month, estate agent Sherry FitzGerald said last year was the turning point, reporting that after five years of falling prices, the average price of a Dublin property rose 1.5 per cent.
The rest of the State also showed signs of stability and, while prices fell by 3.3 per cent last year, it was nothing like the decline of 16.2 per cent which was recorded in 2011.
Prices in some areas certainly bounced towards the end of the year but this could be as a result of many first-time buyers taking advantage of mortgage tax relief, which expired at the end of December.
There will be no such bounce this year and with many Nama properties set to come on the market and banks targeting the buy-to-let sector, there will most likely be a glut of certain types of property coming on stream. This will inevitably push some prices down.
Prices in other areas, however, are likely to go in the opposite direction. In a series of localised markets, some prices may well fall by 20 per cent or more in three years, but experts predict that in desirable urban areas, they will climb or, at the very least, stabilise.