7th January 2010

Alan McQuaid, Chief Economist, Bloxham Stockbrokers, commenting on the latest Daft research on the Irish property market.

For the vast majority of people 2009 was a year well and truly to forget, with the Irish economy contracting at a record rate and unemployment soaring as a result. The global financial crisis continued to dominate matters with the availability of credit or rather the ongoing lack of it, remaining the key theme. Against this background it was hardly surprising that the domestic property market continued to suffer, with house prices falling sharply all across the country. Indeed, the latest property review from daft.ie makes very sober reading, with little indication that things will improve dramatically on the housing market front any time soon.

According to the survey, asking prices last year were down around 19% on average following a decrease of almost 15% in 2008, while in the final quarter of 2009 they dropped to just over €242,000, a staggering €110,000 or so below their peak. Dublin City Centre has been the worst hit area during the housing market downturn and this was again evident in the latest review, with asking prices in the fourth quarter of last year down 42.5% from their peak. However, all areas of the capital saw sizeable falls, with North County Dublin the least affected, but still down close on 31% from the peak in early 2007. Outside Dublin, one could pick any county and see a similar result, with prices in Cork and Galway down around a third in the final quarter from where they were at the height of the boom. Limerick posted the best result, though here again prices in the fourth quarter of 2009 were still almost 21.5% off peak.

That said, there are some seeds of comfort from the Daft report, with the average time to sell a property falling from the previous quarter. The typical Dublin property is now taking about four months to sell, compared to seven months elsewhere in Leinster and more than nine months in other parts of the country. Meanwhile, the stock of properties for sale in the country remains above 60,000 units, but in Dublin that represents a decline of 17% in the year. The overall message in the report is that while house prices continue to adjust downward, there appears to be an easing off in the rate of decrease.

My own view on the economy is that we will see positive year-on-year growth in the second half of 2010, and that may result in a slight increase in house prices towards the latter part of the year. However, in overall terms, I would expect house prices to drop another 10-15% on average this year, with Dublin again seeing the biggest decline. But as prices start to recover, Dublin should see larger gains than elsewhere, though the major cities should quickly follow the upward trend of the capital. Looking further ahead, I expect house prices to be higher on average in 2011 than in 2010, and should rise on a five-year view as the labour market returns to normal.

2010: a turning point for Ireland's property market