Ireland Financial News – Mortgages & Banking

 Houses prices in Ireland fell by 9.1% last year.

The House Price Index, published by the ESRI and Permanent TSB, indicates that the biggest prices drops were in commuter counties surrounding Dublin.

House prices were down 16.8% in these regions in 2008.

  Permanent TSB says houses prices now are where they were in the middle of 2005 and it is thought houses prices in 2009 will fall by a further 10%.

It says the market will not recover until the economic situation in Ireland significantly improves.

David Duffy of the ESRI says that is unlikely to happen until 2010.

The fall in Dublin commuter counties was the largest fall recorded – with houses in Dublin down almost 12% and just over 10% for houses outside Dublin.

The national average house price for first time buyers was down 14% last year; that is more than double the decline seen in 2007.

Niall O’Grady of Permanent TSB says the last two years have seen a rate of decline as high as 17%.

He says that trend is likely to continue for at least the remainder of the year.

The Permanent TSB/ESRI index is based on actual transaction prices and not market valuations and other indicators.

The organisations say it is more reflective of the reality of the housing market.

 The Central Bank says it expects the economy to contract by 4.7% this year, as Ireland continues to be impacted by global recession and falling demand.

In its latest economic forecast, the Central Bank says the contraction will lead to significant job losses with 100,000 fewer people working by the end of the year.

The bank says unpalatable short-term measures are needed if the economy is to stabilise in 2010.

In one of the most negative outlooks published so far, the bank says the contraction in the economy this year will more than cancel out growth the economy enjoyed in the boom year of 2007.

In the housing market, blamed for many of the ills, the Central Bank says completions could fall to as low as 22,000 units this year compared to 52,000 last year, despite their being more affordable.

Last year saw the first drop in employment in many years. The trend is set to accelerate and assuming some emigration, unemployment is likely to average 9.4% of the labour force this year.

However, it believes Ireland has the potential to grow strongly again if productivity can be improved but the potential is not a given and the Central Bank says unpalatable measures are needed.

The bank says the largest item of government expenditure, the public sector pay bill, is ‘beyond the scope of current resources’.

It says the public sector needs to use its purchasing power to drive hard bargains with the services sector.

The central bank suggests reducing tax avoidance schemes and imposing user charges for public services.

It describes Ireland as unusual in not applying an annual residential property tax.