Central Bank accused of scaring off house buyers

 

THE CENTRAL Bank has been accused of scaring potential house buyers and talking down an already chronically depressed housing market by some of the State’s leading estate agents.

Industry representatives claim details of a banking stress test carried out by the bank and published earlier this week indicate that it is out of touch with market realities and could significantly delay any potential housing sector recovery.

The bank is testing the lenders to see how much of the €35 billion set aside in the EU-IMF bailout fund for the banks will be needed.

In the first of two scenarios, the Central Bank said house prices could fall by 13.4 per cent this year and 14.4 per cent next.

In the worst case, however, the bank said the falls could be as steep as 17.4 per cent this year and 18.8 per cent next. All told, this would mean a decline of 60 per cent from the peak of the market in 2007. However, estate agents said yesterday that such a decline had already happened and to suggest the market would continue to collapse at that pace until 2013 was entirely inaccurate.

“Their figures are just wrong. The market is already down by between 50 and 60 per cent, it is that simple,” Marcus Magnier, the director of Colliers International told The Irish Times.

“Where is the Central Bank getting this figure of a 32 per cent drop so far with another 28 per cent to go? I don’t know what planet they are on,” he continued.

“All the property gurus were telling us that the market would fall by up to 60 per cent and it has but now people need to recognise that there is good value out there and let’s get on with business,” he said.

Michael Grehan, managing director, Sherry FitzGerald, echoed those concerns and said according to its data, prices in Dublin had fallen by 53 per cent and by 50 per cent around the country since the peak.

He said its house price index had been in line with actual house prices for nearly 20 years. “When someone reads that house prices could fall by 14 per cent this year and next, it really kicks confidence. Why would they jump?” he said.

The head of research at Savills Ireland, Joan Henry, said its data indicated that price drops of 55–60 per cent were already in effect, particularly in prime locations.

“We are seeing evidence that where prices have been adjusted from the peak by these amounts, sales are taking place again,” she said. She claimed family homes were selling at 45–50 per cent off their peaks but for apartments and larger homes, corrections of 55 and 60 per cent were required.

Ms Henry suggested that activity on the ground “may not yet have fed into the data the Central Bank has available and that is why it must build it into its future scenarios”.

Ed Carey, acting chief executive of the Irish Auctioneers Valuers Institute, said the results of the stress tests highlighted “the absence of a national house price database”. He said there were “so many surveys, many of them conflicting, but the bottom line is no one knows how much the market has fallen by. If the news is bad, then let’s talk about it. Let’s not have spin, positive or negative. All I want to know and all people want to know is what the reality is and how much houses are selling for.”

In a briefing document, the bank said it was not making forecasts of outcomes but representing “two possible paths from a large range of future outcomes regarding property prices”. It said there was “a significant degree of uncertainty surrounding the range of possible future outcomes for the domestic property market”.