Housing market to remain sluggish

House prices in Ireland are unlikely to fall further but it will take a number of years before the market picks up again, a new report from ratings agency Standard and Poor's has concluded.

The agency says that with house prices down by at least 33 per cent from their peak - the largest contraction in Western Europe since the global economic crisis began - the decline in the cost of housing has now bottomed out.

"In terms of market fundamentals, the price contraction implies that affordability is back to its pre-2000 level, which suggests that unlike other markets, Ireland has pretty much fully corrected the excess of the previous housing bubble. Still, this does not mean that the market is about to pick up again soon, in our view," the report says.

S&P says the oversupply of property is likely to negatively impact on the market for some time to come. It adds that with growth expected to remain weak this year and a likely gradual rise in euro zone interest rates, there is little to be optimistic about in the short-term.

Ireland is not alone in having a stagnant housing market. The report also suggests that buyers are expected to exercise caution in a number of other countries.

"We expect housing markets to retreat in the UK and France, and remain in the doldrums in Spain and Ireland. In contrast, steady market conditions continue to prevail in Germany," said Standard & Poor's chief economist for Europe, Jean-Michel Six.

"We think prospective homebuyers may well hold off on acquisitions for a while, given governments' implementation of fiscal austerity plans-particularly in the UK, Spain, and France-and central banks' likely actions to raise borrowing costs in the next 18 months, which would halt accommodative monetary policies in Europe," he added.