House prices to be halved by end of crash, warns bank

Houses will have lost almost half their peak value by the end of the property crash, leading economists claimed today.

Ulster Bank warned although falling prices had boosted affordability for cash-strapped home-buyers, weak demand will continue to drive down costs.

By June prices had fallen for 28 successive months, with a permanent tsb/ESRI study citing a drop of more than a fifth from the heady days of the construction boom.

However, Ulster Bank said the true decline was around 35% and predicted prices will plummet another 10% by the end of 2010.

Simon Barry, the bank’s chief economist, said: “What needs to happen is that the economy needs to be improving at that stage.

“In mid-2010 hopefully the world will feel like a better place and hopefully for the Irish economy there will be light at the end of the tunnel.

“As long as the international recovery stays on track then that should be translated into some improvement here.”

Permanent tsb/ESRI said the average house price in May was €245,295, compared with €311,078 at the peak in February 2007, but Ulster Bank said the tsb/ESRI survey will see price falls of 13% this year and a further 20% next year.

Meanwhile, the bank’s experts predict the pace of economic decline will ease next year with a return to growth in 2011.

The bank warned tax revenue this year could fall €1bn short of Government targets, adding that December’s Budget was shaping up to be unavoidably tough.

It called for the recommendations of the McCarthy report to be implemented to the fullest possible extent.

Ulster Bank also said it expects the number of new houses will hit 22,500 this year, up from 18,500 recorded in its March update.

However, it revised downward its predictions for next year claiming just 10,000 will be built instead of a predicted 15,000, marking the lowest annual total since records began.

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