New Research On The Current State On The Irish Housing Market Published

The Central Bank of Ireland today published new economic research, entitled 'Why are Irish house prices still falling?'

The Letter begins by assessing the current state of play in the Irish residential property market. Using over forty years of international house price data, the on-going collapse in Irish house prices is placed in an international context and comparisons drawn with previous housing busts in other OECD members. A suite of models is used to assess whether the fall in house prices is in line with what the prevailing fundamental factors in the Irish economy would suggest.

The key findings of the research include:

•The present Irish house price decline ranks as one of the most severe recorded across the OECD.

•According to a suite of house price models actual Irish house prices have fallen somewhat below the level prevailing market fundamentals would suggest. Our models indicate this fall to be between 12 and 26 per cent as of 2011 Q3.

•The main reasons cited for the continued fall in prices are the related issues of lack of investor confidence, negative future house price expectations and the uncertain macroeconomic outlook. Additionally, the requirement for substantial deleveraging within the Irish financial system and the associated issue of mortgage credit availability are also considered as significant reasons for the decline.

(CD)