Looking at the Knight Frank publication yesterday of their Global House Price Index, we see that Ireland was yet again a world leader in 2010 with an annual decline in house prices of 10.8%. You might think that the worst is over here, but that may not be the case. Although none of us has a crystal ball, the Central Bank of Ireland (CBI) produced a baseline scenario for property prices just two weeks ago in which it indicated a drop of 55% from peak prices before we begin to recover – this was the CBI’s baseline scenario, its adverse scenario, which is intended to model the worst possible anticipated outcome, shows a drop of 60% from peak. If the CBI is correct in its baseline scenario then by reference to what is the most reputable actual house price series in the country, the ESRI/Permanent TSB index, that means that prices nationally have an average further 26% to fall from the end of 2010 with a modest annual recovery from 2012 onwards.
It might be worth pointing out that NAMA has recently said that it feels that prices have dropped by more than is claimed by the ESRI/PTSB – NAMA’s chairman, Frank Daly said that prices in November 2009 were already 50% off peak whereas the ESRI/PTSB was, at that point, claiming that prices were only 29% off. Estate agents and property professionals have also claimed that actual price declines have been greater than those shown in the ESRI/PTSB house price series. And if NAMA is correct, that may mean that prices may not have much further to fall by reference to the CBI’s baseline scenario, but it should also mean that prices are already 50%-plus off their peaks in 2007.
For what it is worth, below is the latest list of forecasts and projections. The list is available in this spreadsheet where you will find the source for the forecast/projection in the comments field.
NAMA Wine Lake 
@NWL, Surely not even the great bear Morgan Kelly would predict a decline of 106%? ;-)
@WSTT, apologies I had shown the further decline % from the start of 2011 as a % of the previous decline from peak (so Morgan Kelly forecast an 80% drop and there has already been a 38.9% drop so the % shown was the future drop (41.1%) as a proportion of the existing drop (38.9%)). Long winded way of saying mea culpa and I have now amended the table so that the drop from start of 2011 is the % drop expected to get to the trough.
So now, to illustrate with Morgan Kelly’s prediction of an 80% drop. A 100k house would eventually be worth 20k. At the end of 2010 the 100k house had dropped to 61.1k so in order to get to 20k it will drop another 41.1k and 41.1k is 67% of 61.1k.
Thanks for drawing attention to this.
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