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21 October 2009

Ireland to see 45% house price crash

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by Gill Montia

Ireland to see 45% house price crash

A leading credit ratings firm says it expects further significant house price falls in Ireland.

According to Fitch Ratings, house prices in the republic have fallen 24% from their December 2006 peak (based on data from the Permanent TSB/Economic and Social Research Institute) and Fitch is now forecasting a total decline of around 45%.

Tax rises, high unemployment, wage deflation and property supply overhang will all play their part in the crash, as Ireland experiences a deep recession.

The agency expects unemployment to increase to 12.5% in 2009, and 15% in 2011, forcing property prices down to align with affordability.

The market could also experience downward pressure on price from increased funding cost for Irish lenders, with mortgage interest rates likely to rise in the years ahead.

Finally, Fitch reports that the scale of potential house price declines across Ireland is already raising concerns over arrears.

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