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.
NAMA Wine Lake 
Would be inclined to go with Moody and Fitchs’ prediction of a further 20% decline over the next 2 years.After all if 5 billion is to be taken out of the economy over the next few years and each household drops about €5k,where will the finance for deposits and repayments come from,not to talk of the Local Property Tax,Water Charges,reductions in income etc,etc.Brings us back to the average price of a 3 bed semi which from 1959 to 1996 was approx. 2.5 times the national Industrial wage which would leave the National Average price for a 3 bed semi at around €90,000 and not the €154,000 currently obtaining so they have a considerable fall to go before reaching the “bottom”Actually a 70% drop from peak would leave the average price at €93,000-the bottom.
Are moody and Fitch predicting 70% drop from peak or a further 20% from now? One would move the average price to 93k the other to 123k.
How can Sand P believe equilibrium is 4.4 times average wages?
Why has there been absolutely no calls by civil liberties groups to protect consumers and take significant risk out of future property bubbles by introducing US style legislation that allows home owners to walk away (jingle mail)
We should also be implementing the Kelly report. We need to protect ourselves from our national preoccupation with land speculation.
2/3 of Irish wealth is caught up in it.
Again the faint calls for this in 2008 have completely disappeared.
Its time the central bank rowed in and convinced government to take the punch bowl away from us drunks.
@Eamonn, Fitch and Moody’s are predicting ultimate 60% declines from peak. As we are presently 50% off peak, that implies another 20% decline.
You’re referring to the Kenny report, not the Kelly report, the one authored by Judge Kenny in 1973/4 and made a range of recommendations including setting limits for payment for land in compulsory purchase situations.
http://www.irishleftreview.org/2009/06/10/kenny-report-1974/
@eammon
Jingle mail is not a simple as it sounds. People lose their deposit, cannot buy another home for 2 years or sometimes more (although there are exceptions). A person’s credit scores suffer and in this US this affects the price you pay for anything you buy on credit, from your car payment to a new sofa to your monthly cc bill. More importantly it may affect a persons ability to rent which they need to do if they just mailed the keys of their home to the bank.
In the US there is a way out and a chance to rebuild, painful as it may be. The set up allows hard working families with no criminal records rebuild and get back to where they once were financially.
The US also has some creative schemes allowing people get out of mortgages on the grounds of involuntary relocation for work, insolvency and some other exceptional cases (illness etc). Short sales are increasingly common, but often require the homeowner to default. There is however a provision for a ‘no-default’ short sale where credit scores are not negatively impacted and the account is closed and reported to credit reporting agencies as “settled but not for full amount”, without a default being recorded. However, some banks allowing short sales are now writing promissory notes for a portion of the shortfall at closing,and selling them on to collection agencies. This is usually negotiable if the seller is alert and able.
All of these schemes are available to anyone who has no criminal record or no history of bankruptcy.But you must be able to document financial hardship.
They are usually guidelines rather than rules so it is up to an individual to engage with their bank and be strong on their own behalf.
But just mailing the keys and walking away is a bit of a myth. It’s not that simple.
So S and P think equilibrium is 154k and the other 2 (Moody’s and Fitch) think its 123k.
I think the other 2 are about right.
Sorry Kenny report! Thanks for the correction. We should implement it though.
Interesting stat from a financial times article today. If we had similar practices to the UK with regard to repossessions we would have had 33,000 repossessions by now. We only had 52 last year. Massive overhang here and something has got to give.
@Eamonn, depends on what the average price was at the peak, but ESRI/PTSB said it was €314k so yes your figures are about right.
We’d have 15,000 repossessions in Ireland per year if we had the same repo rate as the UK which is 27 times ours, by reference to mortgages in arrears
“Fitch and Moody’s are predicting ultimate 60% declines from peak. As we are presently 50% off peak, that implies another 20% decline.”Don’t get it NWL! unless of course it depends on where the starting point is.(50+20= 70)
@SPO, if a property was valued at €100,000 at peak, Fitch and Moody’s are predicting it will bottom at €40,000 that is, 60% off peak.
We’re presently 50% off peak or at €50,000 so to get to €40,000 we would need see a further 20% decline.
NWL Ok see where you are coming from.I was assuming the 20% was in addition to the current 50% from peak leaving the drop at €313k-70%=€93K.Mind you it is still my view that this is where the bottom will be-2.5 times the average industrial wage,though Morgan Kelly may also be correct at 80% from peak.Time will tell.