House prices continue to fall

New figures show that the pace of the fall in house prices accelerated in January. Average house prices dropped by 1.4% in the month, according to the house price index compiled by Permanent TSB and the ESRI. This compares with a 0.9% fall in December and 0.5% in November. Over 12 months, the decline was 9.8%. The average price paid for a house in January was €258,006.

However, these findings are not a true reflection of the current situation in Ireland. Dermot O'Leary, Chief Economist of Goodbody Stockbrokers, said in November 2007, that three reasons can be cited for a discrepancy between its expectations of house price falls and the permanent tsb / ESRI House Price Index:

1. The data are reflective of prices at the mortgage payment stage of the house-buying process. This can be some 3-4 months after a sales price is agreed, and, in a slower market, this lag could get extended further. Therefore, there is a significant lag between market prices and the official house price data.

2. The type of properties in the ptsb database may be concentrated towards the lower price range in the market. While recognising the fact that the ptsb data takes account of the different characteristics of the house, the average price in the country is well below the estimates contained in the dataset from the Department of the Environment.

3. Price incentives, which have become common for new scheme developments, would not get reflected in the data.