Investment managers Friends First is expecting house prices to fall by 10 per cent next year. The forecast is contained in Friends First's latest document ' Outlook for the Irish economy 2002' which was published today.
In an analysis of the property market, Friends First chief economist, Mr Jim Power said the group is expecting a 10 per cent decline in house prices in the year ahead. Nationally, house prices have increased by around 150 per cent since 1997.
Mortgage debt servicing costs have moved from 23 per cent of disposable incomes in 1994 to 28 per cent in 2000. While these figures are not alarming, Mr Power warns that a sharp and sudden economic deterioration could spell trouble for some house owners.
He said that the sharp rise in house prices and the consequent growth in debt over the past five years makes Ireland quite vulnerable to a sharper than expected slowdown.
"Those with relatively new mortgages and who have paid a high price for a property are most exposed," he said.
"Mortgage rates have fallen sharply, which is some comfort, but low mortgage rates are irrelevant in an environment where jobs are lost. Regionally, areas with a heavy dependence on a single industry are very vulnerable," he said.
Looking beyond the difficulties of 2002, Mr Power predicts a return to stronger growth territory, in 2003. However, he rules out a return to the growth rates enjoyed in the second half of the 1990’s, forecasting instead a more modest growth rate of around 4.5 per cent over the next five years.