House prices overcorrected by 12-26% - Central Bank
30 April 2012 16:04
House prices have plummeted to 12-26% below their fundamental value according to the Central Bank.
An economic letter published by the bank today says that the 'overcorrection' has occurred for a number of reasons, most noticeably because of a lack of credit from financial institutions and a reluctance to buy among people who believe prices are still on a downward trend.
The evaluation of the fundemental value of the properties is calculated according to the note by analysis of house prices in relation to incomes and rental values.
The severe downturn in the Irish residential property market is entering its fifth year and has already become one of the largest and most protracted in the OECD says the note. It continus by saying that an revival of then sector appears to be some way off.
The stagnant levels of lending were put into further focus by other research published by the Central bank today which showed that lending for house purchases was 2.4% lower in March on an annual basis, while lending for consumption and other purchases fell by 8%
Lending to households declined by €167 million during the month of March 2012 following a net monthly flow of minus €355 million in February.