Clare house prices drop 38.6% since peak of boom

THE first three months of the year saw a 3.6% drop in the asking price for houses in Clare, according to the latest daft.ie report. This was a greater drop than the average across the country, which was 3.1%.

The figures show that the average one-bedroom property in Clare had an asking price of €70,000, the average two-bed was €120,000, three-bed €158,000, four-bed €247,000 and five-bed €291,000.
The average price in Clare is down by 14.4% over the past year, with current prices down 38.6% on those at the peak of the boom.
Writing in the report, Eoin Fahy, chief economist and multi-asset strategist, Kleinworth Benson investors said that while the rate of decline of prices seems to be moderating, there are a range of new factors that could drive prices even lower.
“It’s clear that the ECB is about to raise interest rates, probably as early as this week. And once interest rates begin to rise, they will surely rise steadily for the next year or two, as the ECB seeks to return rates to more normal levels, say 2% to 3% above the current emergency rate of one per cent,” he stated.
“This will impact on house prices in several ways; new buyers will get a smaller mortgage approval for a given level of income, as the monthly mortgage payments increase. Existing mortgage borrowers will have to finance higher monthly repayments. In many cases, the extra strain could push borrowers into arrears and for some, that could mean that they have to sell their homes, increasing the supply of houses on the market. Potential buyers, even those that are not significantly directly affected by the increase in mortgage rates, will be concerned that higher interest rates will lead to further house price declines and may defer their purchase.”
As well as rising interest rates, the market could become flooded with new properties, he warned. “Secondly, there is a risk, though only a risk, not a certainty, that there could be a surge of repossessions and forced sale of properties. While the banks have, in general, been quite unenthusiastic about forcing families out of their homes, for obvious reasons, and have furthermore been very constrained by the new code of conduct for lenders, this may not last forever. At some point, the so-called extend-and-pretend policies of the banks (extend the loan and pretend it will never be repaid) will come to an end. In a benign scenario, by the time the banks get tough on borrowers, the recession will be over, house prices will be rising and so the problems won’t be all that large. In a less benevolent scenario, the banks won’t be able to wait that long and will be forced to start repossessions and forced sale of homes while the economy and the housing market is still very weak and that’s a recipe for yet further declines in house prices of course.”
The myhome.ie report for the first quarter of 2011 has also been published. It estimates that the average asking price for a three-bed semi in Clare in the first quarter of the year was €165,000, down 5.7% in the first three months of the year. This was a steeper fall than that seen anywhere else in Munster.
The median price of a four-bed semi in Clare during the first quarter of the year stood at €185,000, down by just under 12% over the last year.
Six in every thousand completed dwellings in Clare are vacant, which is slightly above the national average.