Property market facing a ‘perfect storm’

Date Published: 06-Apr-2011

House prices across Galway – which are already down by between 35% and 60% since the height of the construction boom – look set to take a further hit as a ‘perfect storm’ looms over the property market.

A leading economist has warned that a surge in repossessions, coupled with rising interest rates, restricted mortgage lending and an increase in properties on the market as struggling homeowners are forced to sell, will all cause a “second wave of weakness” in the market.

Figures released this week show that asking prices for homes in Galway City are down 4.8% since the end of last year, while in County Galway, prices are down 1.3%.

In fact, the latest ‘Asking Price Index’ from Daft.ie, the country’s biggest property website, shows that since the peak of the market, prices in the city are down 42.3%, with the county down 42%.

However, there is separate evidence in county areas of property prices being given ‘haircuts’ of up to 60% by some developers desperate to offload stock.

Now, Eoin Fahy, Chief Economist with Kleinwort Benson Investors, has warned that a “new set of problems” could be on the way for the property market.

“It’s clear that the European Central Bank is about to raise interest rates. And once interest rates begin to rise, they will surely continue to rise steadily for the next year or two, as the ECB seeks to return rates to more normal levels, say two to three per cent above the current ‘emergency’ rate of one per cent.”

See full story in this week’s Connacht Tribune.