House prices fall 18.5% in 2009

House prices in Ireland fell by 18.5 per cent in 2009, the latest Permanent TSB/ESRI House Price Index showed today.

This is a steeper decline than in 2008, when average prices fell 9.1 per cent for the year.

Prices have now fallen 31.5 per cent from their peak in February 2007.

The cost of housing fell 3.6 per cent in December, picking up pace from previous months when prices fell 3.1 per cent in November and 1.8 per cent in October.

Permanent TSB's general manager in business strategy Niall O'Grady said 2009 was a "horrendous year", blaming a lack of confidence, significant oversupply and a weakening economy for the decline.

"The pessimist will say there's worse to come. The optimist will argue that affordability has improved so much that things will stabilise soon. But the realist will admit we'll have to wait and see," he said.

The average price for a house throughout the State was €213,183 in December 2009, compared with €261,573 in the same month a year earlier and down from the peak of €311,078 in February 2007.

Houses in Dublin were hit hardest by the weak market, with prices falling 4.3 per cent in December and 20.6 per cent for the year. This compares with a decline of 2.5 per cent in the same month and 15.3 per cent in the year for houses outside the capital.

A separate report from property website MyHome.ie said house prices would continue to fall in 2010, with homebuilding predicted to decline further.

A report from the site, which is owned by The Irish Times, predicted asking prices for houses would fall 10 per cent this year. The report estimated prices have fallen about 25 per cent from their peak in early 2007.

"While the economy is forecast to move out of recession from the middle of the year onwards, a true bottoming out for the residential property market will only happen once unemployment peaks and employment levels return to growth again," the report said.

A report from Goodbody stockbrokers yesterday said housing output in Ireland is set to decline further in next two years with house completions slipping as low as 12,000 this year and could drop below 10,000 in 2011.

Separately, the Housing Affordability Index from EBS and economic consultants DKM said yesterday that houses are more affordable now than at any time in the last 25 years.

Additional reporting - Bloomberg