Housing nerves knock 1.6bn off Iseq

Jitters about the housing market knocked €1

Jitters about the housing market knocked €1.6 billion off the value of the Irish stock market yesterday, bringing the amount it has lost this week to almost €3 billion.

The worst hit were those companies most exposed to the property sector, namely the mortgage-lenders and the construction companies, as the latest Permanent TSB/ESRI house price index showed that the average price paid for a house in Ireland last month was €309,071, down 0.6 per cent from February.

Dublin dealers said that, coming on the back of the negative sentiment seen in the Spanish property market earlier in the week, the nervousness among investors was not surprising. "Buyers are certainly waiting in the wings and biding their time," said one trader.

The Spanish stock market, the Ibex 35 index of leading shares, dropped 2.7 per cent on Tuesday, prompted by panic-selling of property stocks following the slump of one of the index's construction companies.

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Earlier this week commentators likened the Spanish housing sector to Ireland's, saying that the high levels of housing activity in both economies was unsustainable. However, others were quick to point out that other areas of the Irish economy remained robust and that there was no reason why a soft landing in the housing market could not be achieved.

Yesterday dealers said that the sell-ff was likely to be a blip and somewhat exaggerated because of the heavy weighting of the Iseq towards financial and construction stocks.

The situation was also exacerbated by the continuing declines in the value of the dollar, which has implications for Irish companies which export to the US and those which have operations in the region.

Overall, the Iseq fell 1.4 per cent, to 9,470, its lowest closing level in more than three weeks.