Sherry FitzGerald, Ireland’s largest estate agents has announced that the average price of a second-hand property in Ireland fell by 4.5% during the second quarter of 2008, compared to a price reduction of 1.9% in the first quarter of 2008.

The results for the twelve months to June show a price reduction of 10.2%.

The results for the Dublin market are even more pronounced with price reductions of 5.4% in the quarter and 11.4% in the year to June 2008. The Cork market recorded price deflation of 3.2% in the quarter and 10.3% in the twelve months to June.

Commenting on the results Marian Finnegan, Chief Economist, Sherry FitzGerald Group said;
“The results of the price barometer illustrate that the reprieve in the pace of price inflation evident in the first quarter has abated. The combination of the tightening of liquidity in the market, the threat of potential interest rate increases and concerns about the future stability of the economy has brought about fresh wave of price correction.

Since this phase of price deflation began in the Dublin market in the autumn of 2006, the results of the Sherry FitzGerald barometer shows that prices have fallen by approximately 16.5%, effectively bringing prices back to end 2005 levels. If one takes in consideration CPI inflation the real price deflation is closer to 25%, a factor which suggests that the current phase of price correction is much more advanced than many commentators or other indices suggest. This bodes well for price realignment in the short to medium term.”

An analysis of the purchaser profile in the second quarter of the year reveals that first time buyers bought approximately 37% of the properties traded in that period, compared to 33% during the same period in 2007. Not surprisingly investors were less active in the year to date purchasing 10.2% of the properties traded in the period, compared to 18.6% in the same period in 2007.
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The trend of strong rental inflation moderated further in the opening months of 2008 with the CPI index of privately owned rents rising by 5.97% in the twelve months to May 2008, compared to an annual average growth of 10.98% in 2007.

An analysis of the profile of vendors who sold their property through Sherry FitzGerald in the year to date revealed that 25% of vendors were selling investment properties, this compares to 28% in the same period in 2007. Furthermore, approximately 22.6% of vendors sold with the intention of purchasing a larger property. This is still an indicator of wealth levels in the economy. Finally approximately 27.2% of vendors were selling their home to relocate to a different county within Ireland.

Looking to the future Ms Finnegan noted, “Despite a positive start to 2008, it now seems clear that the year ahead will be a challenging year for the economy and the property market alike. That said as the ESRI noted in their Medium Term Review in May, it is perhaps wise not to be so transfixed by current events that we miss the opportunity to prepare for a better future. Despite the slowdown in the housing market, the demographic factors underpinning the rate of household formation will result in a relatively strong demand for housing in Ireland in the medium term with current estimates suggesting an annual demand for 54,000 units per annum in the period to 2021.

Furthermore, the slowdown in the delivery of new property to the market will facilitate in return to positive price inflation in the short term albeit at a much lower pace than experienced during the Celtic Tiger period. The recent decline in house prices coupled with continued income growth suggest an improvement in affordability over time. Further moderate house price inflation will underwrite this improvement in affordability, all of which bodes well for future accessibility of the market place.

In conclusion, while we may never return to the glory years of the Celtic Tiger, we can take comfort in the fact we can anticipate an evolution to a mature, resolute economy with a dynamic housing market which is more affordable and accessible to our population than it was at the height of the roaring Celtic Tiger years.”