The price of houses fell by a reported 15% during the past year, according to the property website Daft.ie. This means that prices has now dropped by about 40% from the peak in 2007.
This raises the question, why are the prices still falling and when will they reach the bottom.
One obvious reason for the falling prices is the lack of buyers in the market. There are a number of reasons for this, which include buyers waiting to see if the market has reached bottom, but also by potential buyers being unable to get a mortgage from Banks or Building Societies in order to purchase a home.
Due to the state that the Banks are in at present, having to be bailed out by the Government means that they are reluctant to lend money, they are hording money in order to shore up their balance sheets. Unfortunately, this has a very negative effect on the property market as potential buyers are unable to get a mortgage, and so the downward cycle continues. This also causes problems for the economy in other ways, as people who wish to move to take up a new job, may be prevented by their inability to get a suitable home for their family. This has a knock on effect on the economy.
House prices will only stabilise when the Banks and Buildings Societies start to lend mortgages to buyers. This will have the effect of allowing first time buyers to enter the market and others who wish to move the opportunity to do so and this is when the market starts to recover.
There is no sign of this happening any time soon, even though the Taxpayer through the government has put several Billions of Euro into the Banks in order to keep them in business.
When the Banks start to lend out mortgages again, one question that will come up is how much of a deposit will the Lenders require of the buyer, and what percentage of the property price will the Banks be prepared to lend. But that is for another day.
