DNG CEO Keith Lowe believes that property prices in Ireland are now “over-correcting” themselves but insisted that 2012 “will be a turning point in the market” with “increased transaction levels in the year ahead.”
Speaking at the release of the property company’s 2011 review and 2012 outlook, Mr Lowe said that the industry was being badly affected by the lack of mortgage lending currently available but welcomed the fact that the banks were slowly starting to release funds again.
In his report, Mr Lowe said: “Following five years of sharp price falls in the residential property market, it is our belief that property prices are now over-correcting due to the unusual economic conditions that we find ourselves in. This is also predicated by a lack of liquidity and in particular restricted mortgage finance both in the owner-occupier and investment sectors.
“Property prices did get out of control over the last decade, but they have now dropped by an average of 65% in the Greater Dublin area since 2006 and prices are now back to levels not seen since the year 2000. A number of distressed property auctions, whilst successful in terms of sales, have also added to the over correction as, in the main, they are limited to cash buyers only.
“It is also interesting to note that Dermot O’Leary, Chief Economist of Goodbody Stockbrokers, who has provided an independent assessment of property prices for us, feels that a fall of 60% is “about right” based on a UK comparison with average price to income ratios and yields.
“The property related measures adopted in Budget 2012, in the form of additional mortgage interest relief and very attractive Capital Gains Tax provisions are welcome and they are an indication to us that the government has finally realised that one of the key factors for economic recovery is to have a vibrant and fully functioning property market. This will not happen without adequate funding for mortgages being available to all sectors of the residential market.
“Certainly, we have noted an increased appetite to lend from the two pillar banks and from a number of non-Irish banks in the last number of weeks. This will assist market recovery and we believe 2012 will be a turning point for the market.
“We have also noted a heightened demand and an increase in transactions for large residential portfolios from cash rich Irish and non-Irish investors which is likely to escalate in 2012 as investors take advantage of low prices, lack of liquidity and the new CGT exemption measure.
“It is our belief that property prices will continue to over correct this year due to liquidity issues in the mortgage market. However, we do believe that prices in some sectors, such as the upper market and properties positioned in mature south and north side Dublin locations will level out, with the possibility of price increases in some pockets where the supply of properties is limited.
“On the basis of low and falling interest rates, the new budget measures and some improvements in the availability of mortgage finance, there is also likely to be increased transaction levels in the year ahead,” he said.
Read DNG’s full report here.