Real estate prices in Ireland at lowest levels since 2002 with a glut of new homes adding to problem

Residential property prices in Ireland have fallen to their lowest levels since 2002 and are now 35% below their peak of four years ago, new figures reveal.

The latest data from the Permanent TSB/ESRI House Price Index shows the average cost of a home is now €201,364. However, the survey, which is based on the agreed sale prices and calculated using data from mortgage drawdowns, indicated the rate of decline had moderated significantly since last year.
The index showed house prices fell by 1.7% in the three months from April to June this year, the lowest quarterly reduction since the second quarter of 2008.
Dublin has been hardest hit by the property crisis with prices in the city falling at a steeper rate than in the rest of the country. Prices fell by 3.5% in the second quarter of 2010, compared to 0.8% elsewhere.
It means that prices in Dublin had fallen by 24.6% in the last 12 months alone, compared to a drop of 14% in the rest of the country, according to the index which is now conducted quarterly rather than monthly because of the fall off in transactions.
The average price for a property in Dublin at the end of June was €242,000, compared with €250,872 at the end of the first quarter of 2010. Outside the city the average price for a house was €181,820 at the end of June compared with €183,309 at the end of the previous quarter.
‘While prices continue to fall at different levels in Dublin versus the rest of the country, this reduction in the second quarter is the lowest recorded quarterly fall in almost two years,’ said Permanent TSB’s Niall O’Grady.
‘This may indicate that prices are starting to find a more sustainable level after almost three and a half years of decline,’ he added.
Some analysts now believe that the market in nearing bottom and will start to level off. ‘This may not be too far off the bottom. In fact, under certain assumptions it is even rational to purchase at current prices given the costs of renting. The relative attractiveness of buying versus renting is also another swing factor in indicating that a bottom may not be too far off,’ said Brian Devine of NCB Stockbrokers.
There is some concern that too many new properties are being built and this could hamper a recovery in the market. Developers started work on 11,000 homes in the last 15 months and there is a glut of 300,000 homes in the country, according to a report from National Institute for Regional and Spatial Analysis (NIRSA) which also says that reckless planning decisions have left one in six houses uninhabited for most of the year in 620 unfinished estates.
The worst hit areas are Leitrim, Roscommon, Longford, Sligo, Monaghan and Cavan, according to the report’s author, Professor Rob Kitchin, who added that there is no need for more homes to be built in the immediate future.