Yesterday, one of the three main ratings agencies, Standard and Poor’s reiterated its forecast from January 2013 that Irish residential property prices will stabilize in 2013. In January 2013, S&P was predicting an almost-irrelevant 1% decline in 2013 and that we were practically at the bottom. In a note yesterday, S&P reiterated this theme. The report is here but is only available to subscribers but S&P is reported to have said
“The heavy slump in the Irish housing market appears to have bottomed out. House prices posted their first quarter-on-quarter increase in 22 quarters in Dec 2012 and we forecast that prices will stabilise this year and next, after falling 6.1% in 2012… The Irish property market will likely continue to stabilise for the next two years, in our view…Price-to-income and price-to-rent ratios have returned to their long-term average, indicating that prices have reached an equilibrium. Economic recovery in 2013 and 2014 should also support demand for housing…Still, while momentum appears to be building in the housing market, the rate of increase in transactions and house lending this year may not exceed 2012, as mortgage interest relief has ended…What’s more, a new local property tax coming into force later this year may also drag on the price upturn”
House price predictions in Ireland can be provocative particularly after the collapse which means prices today are around 50% down from peak in 2007. The two other ratings agencies, Moody’s and Fitch are both predicting 20% additional declines, in Moody’s case the prediction is from summer 2012 and in Fitch’s the prediction is from January 2013.
Now, the ratings agencies didn’t cover themselves in glory before the US and European financial crises from 2007 onwards, so you should probably take their predictions with a healthy dose of caution. Mind you, unlike predictions from many other sources, the ratings agencies don’t really have any skin in the game, so you might say their predictions are more independent.