2008Review: PROPERTY VALUES:Residential property prices have fallen further than people realise, says estate agency chief  Keith Lowe - but he says next year could show a recovery

THERE IS STILL much after-dinner discussion as to what is really happening in the residential property market, only now the subject matter has changed from how high prices are, to how far property prices have really fallen.

At the moment, due to data protection legislation, the media, buyers and sellers alike are starved of accurate information on the actual sale prices that are being achieved for property, leaving consumers with a wholly unsatisfactory vacuum of information.

As a result, most interested parties turn to the plethora of house price indices produced by a variety of organisations.

One of the most respected indexes is the Permanent TSB/ESRI house price survey. Having the ESRI involved has given this survey independence whereas other surveys are deemed to have some sort of vested interest. The highest percentage price drop reported by the Permanent TSB/ESRI from peak, Dublin and nationally, is 16 per cent.

The situation on the ground provides a far more stark reality. It is our view that residential property prices in certain areas of the country have dropped by as much as 40 per cent since their peak in September 2006, although not all areas of the market or the country have witnessed this level of price decrease.

One of the main public indicators of substantial price reductions has been the new homes market where advertisements have been aggressively showing the actual price cuts being offered.

What is interesting is that where new-homes developments have dropped their prices sufficiently (and I say sufficiently!) sales have been strong.

As agents, we have had first-hand experience of this on a number of developments across the country where prices have dropped by 20 per cent to 40 per cent and strong sales activity followed as a direct result.

We recently dropped prices by 40 per cent on a tax-incentive apartment scheme at the MacDonagh Junction shopping and leisure complex in Kilkenny city.

As a result over 40 units have been sold. To me, this level of activity proves the point that there are plenty of buyers who wish to purchase but only when they see what they consider to be excellent value.

We have witnessed similar percentage cuts in prices in the second-hand market.

Dublin 4 and 6 have suffered substantial price falls, but properties in the higher price brackets seem to have been affected most.

Houses under €1 million have dropped by about 20 per cent, while the reduction on properties between €1.5 million and €4 million has been up to 30 per cent, but sales at this price level and over have been very thin on the ground.

South Dublin has shown a similar trend. As an example, we sold two fine semi-detached homes at Dundrum and Ballinteer in 2006 for €660,000 and €820,000 respectively.

This year we sold identical houses in the same estates for €505,000 and €520,000 respectively, showing price falls of 23.5 per cent and 36.5 per cent.

We also sold a pre-war house on an established road in south Co Dublin in 2006 for €1,900,000 and a very similar but smaller property on the same road last May sold for just under €1,200,000 - representing a 37 per cent decrease.

The position in north Dublin is also similar.

We recently sold a house in Sutton for €2,750,000 that would have sold for €4,000,000 two years ago. We also sold a house in Sutton in June 2006 for €1,200,000 and we recently agreed a sale on an identical property in the last few weeks for a price close to €750,000 - a 37.5 per cent drop.

In west Dublin, prices of entry level homes have dropped by approximately 25 per cent in the last two years.

For example, we sold three similar homes in the same modern estate for about €450,000 each in 2006. Last week we sold an identical property in the same estate for €350,000 - a fall of 22 per cent.

While it is only right to acknowledge that many recent buyers will be concerned with the speed and extent of these price reductions, the property market is cyclical and I know that house prices will rebound to levels higher than today at some stage in the future, hopefully sooner rather than later.

It is my belief that next year could show a recovery in the residential market.

My reasoning is that residential property prices have fallen substantially and further than people realise.

Interest rates are now on a rapid downward cycle. As interest rates continue to fall we will soon witness rents exceeding mortgage repayments which will entice tenants and investors into the buying arena once again.

In addition, new homes commencements which form part of a multi-unit development (ie, excluding one-off housing) have collapsed in recent months, running at an annualised rate of around 5,000 completions.

This brings us closer to a time when sales will exceed completions, a key point in reducing the overhang of stock in the market.

Many potential buyers are trying to do the near impossible and predict the bottom of the market but, if a buyer purchases now, I would argue that they will have experienced the majority of the anticipated total price fall.

So, with the up-to-40 per cent drop in prices of new and re-sale properties, with interest rates on a downward trend and potential new and second-hand supply shortages then, if you have the confidence and the money, now could be a very prudent time to enter or re-enter the market.

• Keith Lowe is the chief executive of Douglas Newman Good