HOUSE PRICES may fall 50 per cent from their peak, the Economic and Social Research Institute (ESRI) predicted this week in its latest quarterly commentary. The steep decline is a correction to a hugely over-valued housing market. The ESRI estimates that house prices were one-third over-valued at their peak in 2007, relative to economic fundamentals. And it may be 2010 before a market bottom is reached.
The forecast will depress many homeowners as they watch the sharp fall in value of their primary asset. More will find themeless in negative equity where their home is worth less than their mortgage. Meanwhile, homebuyers will try to time their purchases at close to the trough in house prices – never an easy call to make.
Buyers and sellers in the housing market will be helped somewhat, however, by a long overdue decision by Government to restore some price transparency to an opaque property market. At present, buyers and sellers are greatly handicapped in how they conduct their business. There is no public register of the sale price of houses, other than those sold at public auction. As most house sales are conducted by private treaty, only the seller, the buyer and the auctioneer may know the purchase price. Legally, the sale price cannot be published or otherwise disclosed unless both parties to the sale agree – which they rarely do. For a market that is undergoing a likely 50 per cent price adjustment, the non-disclosure of relevant price information to market participants risks creating a false market; one subject to rumour, misinformation and manipulation.
In the revised programme for government, both Coalition parties have agreed to amend the Data Protection Act to allow publication of sale prices and to set up a register of the details of residential and property sales. In Britain, all house transactions are registered and sale details are made available to the public. As yet, it is not clear how accessible the proposed Irish register will be or how often it will be updated. In a depressed property market, the Government needs to do more to restore public confidence in how it operates. It has delayed far too long in ensuring buyers and sellers can make informed investment decisions based on accurate and up-to-date house price data.
Minister for the Environment John Gormley should make clear the Government’s precise intentions, indicating when the amending legislation will be passed, whether the public will have full access to the property register and how quickly its contents will be updated.