House prices will fall by up to 40pc

jetski

HOUSE prices will fall by almost a half before the economic downturn ends, a leading economist predicted yesterday.

Prices have already dropped by some 25pc since the height of the housing boom at the end of 2005, said Jim Power, chief economist with Friends First. But he expects a further slide of "up to 20pc".

"People may be interested in buying again but they cannot get access to credit. So, if you are in an environment where buyers cannot get credit but there's a lot of excess supply, to me it is clear [prices] are going to adjust further in a downward direction," said Mr Power. "At the end of it I wouldn't be at all surprised if there is a 40pc adjustment from peak to trough."

Yesterday the giant Swiss bank Credit Suisse came up with a similar forecast, saying Irish house prices could fall 30pc to 40pc.

The gloomy picture was presented in the Friends First quarterly economic outlook yesterday, with Mr Power predicting 2009 would be even more challenging. He also predicted job losses spreading outside of the construction sector.

"The economy is going through a very difficult housing market adjustment which is being exacerbated by a lot of negative external developments, such as exchange rate movements, and the whole global credit situation," he said.

He expects no growth for two years, with a 1pc decline this year followed by expansion of 1pc in 2009.

"We are not going to wake up on the first of January next year and find this is all over."

http://www.independent.ie/business/personal-finance/property-mortgages/housing-market-will-fall-by-up-to-40pc-from-2005-peak-1433768.html

corkfella

jim power is a smart man alright, he predicted a soft landing last year so he must be right about this....the bottom line they are only guessing. 2009 could be a tough year for all especially with an incompetent government.

The_Conductor

On a related note today's Financial Times shows financial spread betting on availability of credit showing a minor letup in credit availability in 2009 but serious problems continuing into 2010 and beyond (this contradicts previous reports from Financial Managers which stated that they believe the worst effects of the credit crunch will have worn off within 8-12 months, and is more credible, as it involves people actually putting money where their mouths are).

US inflation has hit a 27 year high and EU inflation a 16 year high. Good luck to anyone hoping for an early cut in interest rates.......

Thankfully oil has fallen back slightly (to US$138 a barrel), still expensive as hell, but at US$10 cheaper- perhaps those of us not pricing our petrol and diesel in dollars may get a slight respite?

S.

gurramok

That oil price has been fluctuating day by day by a few dollars down and ends up even more dollars up a few days later!
Jim Power may be right this time(catching up with reality) but just look at his last predictions over the last couple of years, woefully wrong.

woodseb

jim power is one of the biggest rent a quote merchants out there - he may be right but even a stopped clock is right twice a day. still baffles me that he gets so much press, its not like friends first is a financial powerhouse or anything

drunkmonkey

I hope they do, the price of houses is crazy, if they dropped by 60% I think i'd buy then...I was going to buy a house 5 years ago and thought it was over priced. The same house now is over double the price and it's 5 years older....that makes no sense....:mad: